When a landlord grants a tenant a short lease for a premium, part of the latter sum is treated as an income receipt in the hands of the landlord. The tenant is allowed to deduct this income element against his own revenue receipts, the deduction being spread over the length of the lease (we are assuming that the tenant is occupying the property for business purposes).
I know this latter fact because this is one of the topics that I learned about when I attended the courses that my employer sent me on, when I started my tax career. I also know this because I read about it in an article on buying and selling real estate which appeared in one of the various tax magazines.
That article even had the statutory reference for the tenant’s deduction, so that I could feel confident that it was a true statement. But until recently I didn’t have occasion to look too closely at what the legislation said. And when I did look, I found that the answer wasn’t as obvious as I had expected.
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