Problem:
Brad and Kate received $9,500 for rent from Mike and Janet, who are renting their home in Santa Ana, California. Brad and Kate did not use this property for personal use. The rent covers eight months from August 1 of the current year to March 31 of the following year. The amount also includes a security deposit of $1,500.
Required:
Question: How much should Brad and Kate report as rental income in the current tax year
- $1,500
- $5,000
- $8,000
- $9,500
Note: Please explain comprehensively and give step by step solution.