help with completing schedule E and form 4562

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timer Asked: Dec 17th, 2018
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Question Description

Please help with completing form 4562 and schedule E for the rental business in the problem . Please explain how the values were calculated to include in the form . I have attached the required information .

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Back in 1996, Calvin purchased an old house for the family to call home. However, the real estate market was not so good in Watterson and Calvin saw an opportunity. Instead of moving into the house as their primary residence, Calvin and Susie decided to rent the house and buy a larger house for themselves. The rental is in Watterson at 1212 2nd Avenue, while their main home (where they still live in 2017) is at 6663 Main Street in Watterson. Calvin has been lucky with the 2nd Avenue rental as he has only had two tenants in the entire 20 year period and no one has ever been late with the rent. Calvin does all of the bill paying and rent collecting for this unit but uses a handyman to do any repairs and maintenance. During January 2017, Calvin saw another opportunity in real estate in his town and decided to purchase an additional rental, but this time it was a 4 unit apartment complex at 8888 15th Street 2(kind of outside of town, but still close enough to visit if necessary and to collect the rent). Calvin decided that with 4 tenants, he would use a property management company to take care of screening tenants, collecting the rent and making repairs. Calvin, however, gets final say on the amount of rent and whether he believes the prospective tenants are worthy of renting in his new apartment building. Calvin takes care of paying all of the bills and just gets a rent check from the property managers every other month. In 2017, Susie convinced Calvin that it would be a good idea to buy some property in the mountains. So after quite a bit of looking and discussion, Calvin and Susie settled on a condominium in Squaw Valley, CA at a price of $350,000. So they could make the monthly payments, and since they could not be there every day, they decided to use a rental company to make arrangements to have the condo rented on days when they were not going to be there. After the purchase of the condo, Calvin and Susie hired a contractor to do some re-modeling. Susie really wanted to have a much larger kitchen area and had the contractor remove one of the walls separating the kitchen and the living room. During the demolition, the contractor, who happens to be Susie’s brother, Darryl, found a painting hidden inside the wall. Being an honest fellow, Darryl, gave Susie the painting figuring it belonged to her now. Susie is an art teacher in high-school so knew a little bit about art and decided to have the painting appraised by the Antiques Roadshow when it would be in Sacramento. Turns out, the painting is an original Jackson Pollock worth approximately $150,000 according to Susie’s other brother Darryl, who happens to be a professional appraiser. The remodel, costing $75,000, was finished on July 15, 2017. Following is the list of attachments related to the rental properties: Attachment 4: 2nd Avenue income and expenditures Attachment 5: 2nd Avenue Fixed Assets Attachment 6: Apartment complex details Attachment 7: Squaw Valley Details Calvin’s good luck in real estate ran out at the end of November, when he got a 1 a.m. phone call from the police department on November 28th. Apparently, one of the tenants of the apartment complex overcooked their turkey and started a fire in the kitchen. Because none of the other tenants were home, and the person who started the fire decided to run instead of use the fire extinguisher Calvin provided, the entire 4 unit complex burned to the ground with nothing left other than ashes and the underlying land. Even worse, when Calvin went to make a claim with the insurance company, he was told that no one had ever opened a policy on the apartment complex. Calvin thought Susie had done it and Susie thought Calvin was doing it, so they had no insurance on the apartment complex. Because the complex was a total loss and there would be no insurance proceeds, Calvin decided to sell the burned out lot and closed the sale on December 30, 2017 for sales price of the lot of $40,000. Back in 1996, Calvin and Susie purchased their first (and current) home. They paid $450,000 for the home and borrowed 80% of the purchase price from the local bank at 6% annual interest. Over the last 20 years, they have managed to pay down the principle balance to $275,000. Because interest rates are so low in 2017, Calvin decided to refinance the mortgage on the house and pull out some additional equity cash to remodel the house and also pay for some non-house related expenditures. The local bank agreed to refi the house for 80% of its current value of $800,000 at an interest rate of 2% (simple) for 30 years. The refinance was completed on July 1, 2017. The refinance required that Calvin pay a 1.25% loan initiation fee to the bank upon closing the refinanced loan. The points are NOT included in the interest paid on the form 1098. The bank sent Calvin and Susie a form 1098 (Attachment 11) showing the following: Principle balance at beginning of year $275,000 Principle balance at end of year $640,000 Interest paid during 2017 $16,250 Property taxes paid during 2017 $6,722 Susie kept careful track of where all the loan money went and provided the following summary: Refinance of original mortgage $275,000 Points paid on the refi $8,000 Proceeds for remodeling $235,000 Money used for car wash asset $122,000 purchases Calvin thought it would be a good idea to also pay his 2018 property taxes in December to get the deduction, so he drove down to the County assessor’s office and paid another $6,857 on December 31, 2017. Calvin paid personal property taxes for the following items during 2017: Boat $375 Ford F150 $425 Lexus $500 Corolla $175 Honda $225 Ferrari $975 ...
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Tutor Answer

Joantutor
School: Rice University

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Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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