@ future ,
I agree with amor D . Answer and explanation and query would help to understand the question better .
I have search IRS site for reference, and found following details.
pls confirmed if the answer is correct or not .
Also thanks , please keep posting such questions . because I was not knowing about it . But now after studying in more detail, I will remember in future
..
Johnson, an accrual-method landlord, receives the following receipts during the current year associated with his rental of apartments:
Lessees’ refundable deposits……..$ 2,000
Value for modifying a lease………50
Rent……..10,000
Lessee improvements made in lieu of rent……..1,500
Prepaid rent…………….500
Bonus for granting a lease…………….200
What amount should Johnson report as taxable income from his rental investment?
A. $14,250
B. $12,250
C. $12,050
D. $12,000
1) Bonus paid by lessee to lessor to renew, extent , terminate the lease .lessor enter it in taxable income
2) If the lease clearly states that the improvements are in lieu of rent, then the value assigned to the improvements will be treated as rental income to the landlord. In such a case, the landlord will include the value of the improvements in taxable income in the year the improvements are completed or paid.
3) Value for modifying a lease………=added to lessor’s income
If the lessor and lessee agree to a substantial modification of the terms of an existing lease .eg. For example, if a 10-year rental agreement that provides for rent of $25,000 per year is modified at the end of the 5th year to provide for rent of $30,000 per year in subsequent years, the entire agreement (as modified) provides for a 10-year lease term and provides for rent of $25,000 per year in years 1 through 5 and rent of $30,000 per year in years 6 through 10.
4)rent 10000+prepaid rent 500+ Value for modifying a lease 50 + Lessee improvements made in lieu of rent 1,500 + Bonus for granting a lease 200 =12,250
5) Lessees’ refundable deposits……..$ 2,000 = Not taxable as returned back.
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