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Tax Deductible?? 
6 posts by 6 users
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I did something new this year. I had a prospective tenant offer to lease a rental house I own if I would buy out their current lease. The cost of the buy out was very close to one month's rent on my rental, so it was about the same as giving one month of free rent which I have done on several other rentals in the past 18 months. So I did it. Now, is the cost of buying out their lease a rental expense for me? |
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Yep. The lease buyout would be deductible. |
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I would assume so, but my stock answer to questions like this is to consult your CPA. |
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Jackie, In case you hadn't noticed, Mike has the title of "Accountant" in his heading info ... |
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Mike, it depends on what ledger accounts you have to slot this expense. I can see it going in several categories. As to slotting the expense side, I would simply make a new line item "rental buyouts", that best describes the expense IAW GAAP. There are other places you might stick this, advertising, (an expense to gain a new tenant) legal expenses (paying off an existing contract) don't know your ledger entries/chart of accounts. Sounds like you could own or manage the property bought out, if so, I would simply cancel the lease on the books and bring the amount in as new rents under advertising as you probably did with outher prepaid rents deals. Bill |
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Mike this is certainly a legitimate rental expense. Consider it part of the cost of turning a unit or placing a tenant. I believe that it would pass the test of being ordinary and reasonable. While not a common situation it is not an uncommon real estate practice and the expense is reasonable. |
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Posted: 07/29/2010 at 09:37AM
