Question

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements is not income to the landlord. This rule is an example of: Group of answer choices The wherewithal to pay concept. The tax benefit rule. The arm’s length concept. A clear reflection of income result. None of these.

Answer 1

The correct answer is letter "A": The wherewithal to pay concept.

Step-by-step explanation:

The wherewithal to pay is a concept used mainly when it comes to taxes. It states that a taxpayer should be able to make the payment of tax obligations when that person can do so. In other words, if the taxpayer owns a house its value will increase over time since the real state appreciates. Therefore, when the taxpayer sells the house, he or she will need to pay taxes. There is where that individual has the wherewithal to pay.