Free Solved Linda and her sister Hannah own a bed and breakfast hotel in Maine in which they provide maid services and breakfast to their tenants. Which of the following is true regarding the tax return that Linda must file.


Linda and her sister Hannah own a bed and breakfast hotel in Maine in which they provide maid services and breakfast to their tenants. Which of the following is true regarding the tax return that Linda must file.  

Select one:

a) She must file Schedule C

b) She must file Schedule E

c) She must file Schedule C and E

d) None of the above

Step 1 of 2

The given question is addressing the tax filling requirements for Linda, who co-owns a bed and breakfast hotel with her sister Hannah in Maine.

From the given option, it is to be determined which IRS schedule Linda needs to use when filling her tax return.

A tax return is a collection of documents and forms that people and organizations submit to tax authorities, like the US Internal Revenue Service (IRS), in order to declare their earnings, outlays, and other pertinent financial data. Calculating the amount of income tax due to the government or, in certain situations, figuring out if the taxpayer is qualified for a tax refund are the goals of filing a tax return.

Form 1040 is the typical form used by individuals in the United States to file their federal income tax returns. Information about various income streams, credits, deductions, and other elements that influence the taxpayer’s total tax obligation are all included in the tax return.

Explanation:

On the basis of the situation of Linda and her sister’s bed and breakfast business, the schedule is to be chosen that is required by Lina to file.

 

Step 2 of 2

In order to choose the correct option, firstly it is necessary to understand what the given schedule is all about –

Schedule C- For the purpose of reporting income and expenses from a business in which the owner is actively involved in operations, Schedule C was created. For companies such as sole proprietorships or LLCs with a single member, this form is appropriate.

Schedule E – When reporting rental income that isn’t directly related to providing services, Schedule E is usually utilized. Schedule C should be used to record the revenue and expenses because Linda is actively involved in the day-to-day management of the bed and breakfast.

on the basis of the nature of schedule, Linda should file Schedule C since it fits the description of her bed and breakfast, which offers more services than just real estate rentals.

Explanation:

After evaluating the nature and concepts of all the given schedule, it is resulted that the most appropriate schedule is schedule C because it aligns with the nature of her bed and breakfast business, which involves providing services beyond just renting out property.

 

Final solution

The Correct option is (A) She must file schedule C.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Call Now Button