Video: Rental Lease Income

In this lesson, Nick Palazzolo, CPA, offers a practical breakdown of how to calculate rental lease income for a commercial property, setting the stage with a three-year lease scenario to explore the nuances of revenue recognition. He meticulously clarifies the treatment of different types of payments, such as security deposits, rent revenue, advance payments, and lease cancellation fees, and how these impact the taxable income reported. Nick breaks down the tax implications of various lease-related cash flows, showing that the income is not limited to the monthly rental charges but may include other specific lease-related payments. The explanation is crafted to impart clarity on how to approach these transactions in actual tax scenarios, ensuring an understanding of the critical differences between refundable and non-refundable deposits, as well as the proper recognition of income when payments such as cancellation fees and advance rent come into play.