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the rental income is related to a 24 month rental contract the company signed on November...

the rental income is related to a 24 month rental contract the company signed on November 1, 2017 which stated the company would receive $2,000 per month in rental income. The company received prepayment of $48,000 on november 1, 2017. the company recognjzed $20,000 of rental income for books in 2019
how much is recognized in 2019 for tax purposes
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Answer #1

Advance Rent

It is the full/partial payment of rent by a tenant for a future period of time. Collecting advance rent can also be a hedge against renting to high-risk tenants.

Advance rent is considered taxable income in the year you receive it from tenants.

Hence, the $20,000 of rental income received is taxable in 2019.

Security Deposits

Rental agreements almost always require tenants to provide a security deposit. Therefore, $28,000 ($48,000-$20,000) can be considered to be the security deposit in this case and unlike advance rent, a security deposit isn't taxable when you receive it. Instead, iit is only taxable when yoa're no longer obligated to return it to the tenant.

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