Hugh and Mary own a cabin in Big Bear that they rented for 45 days at $4,500. They used the cabin for personal use for 30 days during the year. The allocated expenses related to the cabin of $6,000 resulted in a net loss of $1,500 for this rental activity. What is the proper tax treatment of these amounts by Hugh and Mary?
Report net income of $4,500
Report rental net loss of $1,500
None of the amounts should be reported
Report income and expenses on Schedule E but expenses cannot exceed income