Ed owns Oak Knoll Apartments. During the year, Fred, a tenant, moved to another

Question

Ed owns Oak Knoll Apartments. During the year, Fred, a tenant, moved to another state. Fred paid Ed $1,000 to cancel the two-year lease he had signed. Ed subsequently rented the unit to Wayne. Wayne paid the first and last months’ rents of $800 each and a security deposit of $500. Ed also owns a building that is used as a health club. The club has signed a fifteen-year lease at an annual rental of $17,000. The owner of the club requested that Ed install a swimming pool on the property. Ed declined to do so. The owner of the club finally constructed the pool himself at a cost of $15,000. What amount must Ed include in gross income?

Explanation / Answer

$1,000 Paid for the cancellation of the lease will be considered as income in calculating the Gross income

Wayne 'S rent = $800 for 12 months = $9,600 as rent remain same through out the year

$17,000 annual rental will be added to gross income

So the total gross income = $1,000 + $9,600 + 17,000 = $27,600

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