Question

In December 2013, Max, a cash basis taxpayer, rents an apartment to Kadeem. Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400. The amount of income reported as taxable in 2013 is (Points : 3) A. $400

B. $1,300C. $1,800
D. $2,200

Answer 1

Option C is correct ($1,800)

Step-by-step explanation:

Option C is correct ($1,800)

Reason:

Max receives both the first and last month rent totaling $1,800, so Max has to pay a tax in accordance with $1,800 amount. As this amount of $1,800 is received, so tax is on this amount.Tax is not applicable on the security deposit because it has to be returned to the tenant when tenant will move out. If security deposit is not returned completely or some amount is kept then tax is applicable.