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Pedro owns five rental properties. He contracts with East Lake Properties, Inc., to manage the...

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Accounting

Pedro owns five rental properties. He contracts with East Lake Properties, Inc., to manage the real estate. East Lake obtains tenants, negotiates leases, makes necessary repairs, pays expenses related to the properties, and remits monthly net receipts to Pedro.

  1. Pedro's sale of the properties at a gain will result in a capital gain.
  2. Pedro's sale of the properties at a loss results in an ordinary loss on his tax return

A. Only statement 1 is correct. B. Only statement 2 is correct. C. Both statements are correct.D. Neither statement is correct.

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