Bonnie's Sister, Diane, Wants to Open a Restaurant

Multiple Choice

Bonnie's sister, Diane, wants to open a restaurant. Because Diane is short of funds, Bonnie purchases the building and leases it to Diane. No agreement is signed, and Bonnie tells Diane not to worry about paying rent until the cash flow can support it. Also, Bonnie promises not to sell the property to anyone other than Diane.
I.Any expenditures Bonnie makes regarding the building would be classified as production of income expenses.
II.The building rental has the characteristics of a gift.
III.The dominant motive in acquiring the building is to earn an economic benefit (profit) .
IV.Bonnie's property tax expenses related to the property are deductible.
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A) Only statement II is correct.
B) Only statement III is correct.
C) Statements I, II, and IV are correct.
D) Statements II and IV are correct.
E) Statements I, II, III, and IV are correct.