The Tax Court weighs in – Lessee’s “project costs” payment is rental income for lessor

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Abstract: Monthly rental payments made by a lessee constitutes taxable rental income. But rental income can encompass other types of payments, as well. This article discusses a taxpayer case which shows that, if lessors aren’t careful, they could find more tax liability than expected, resulting in significant IRS penalties. A sidebar notes how this case also indicates that proper reporting of rental income to the IRS isn’t always as straightforward as it may seem. Stough v. Commissioner, No. 8256-11, June 2, 2015 (U.S. Tax Court)