Question

Beverly owns a rental house. Her current tenant, Corbin, signed a two-year lease and moved into the house in January 2024. At that time, Corbin paid Beverly $1,800 for the first month's rent and $1,800 as a refundable security deposit. Corbin paid the $1,800 rent in cash on the first of each month during the year, except in November when he replaced the water heater in exchange for his rent. The water heater would have cost Beverly $1,500 to purchase and install. How much rental income must Beverly report for the tax year?
$19,800
$21,300
$21,600
$23,100

Answer 1

$21,300

Explanation: Beverly received 11 months of cash rent = 11 × $1,800 = $19,800, plus the November in‑kind payment (water heater) = $1,500, for total rental income of $21,300. The $1,800 refundable security deposit is not included in income.