Final answer:
Advance rent receipts on an operating lease are known as "prepaid rent" or "advance rental income," and are recognized as a liability until the rental period they cover occurs, after which they become rental income.
Step-by-step explanation:
The term for advance rent receipts on an operating lease as the lessor that is taxable when received is typically referred to as "prepaid rent" or "advance rental income." In accounting and business, this refers to payments received by a property owner (lessor) from a tenant (lessee) before the rental period covered by the payment has occurred.
According to accounting principles, when a lessor receives rent in advance, the amount is recorded as a liability initially, as the service (use of the property) has not yet been provided. Over time, as the rental period occurs, the liability decreases and the amount is recognized as rental income.
In the context of a lease agreement, termination refers to the end of the leasing period, after which the agreement may be renewed or ended. A written notice of intention to terminate is generally required, and the premises must be cleared of the tenant's belongings for the termination to be considered complete.
Failure to vacate the premises on time can result in the tenant being liable for additional rent and damages, which may include compensation for the owner's lost potential to rent to new tenants.