Question

In July, Phil leased a building to Bob for a period of 15 years at a monthly rental rate of $2,000 with no option to renew. At that time, the building had a remaining estimated useful life of twenty years. Prior to taking possession of the building, Bob made improvements at a cost of $18,000. These improvements had an estimated useful life of twenty years. The lease expired on June 30, 2019 at which point the improvements had a fair market value of $2,000. Phil did not rent the property for the rest of the year. The amount that Phil, the landlord, should include in his gross income for 2019 is:

Answer 1

$12,000

Step-by-step explanation:

The computation of the amount included in the gross income is shown below:

= Lease payment in the current year × number of months

= $2,000 × 6 months

= $12,000

Moreover, the improvement of $2,000 would not be included unless the property is sold off

Therefore the $12,000 included in the gross income