Allocate the depreciated value over the remaining term of the lease contract. Every year, an aliquot part of the depreciated value should be reported as additional rent in addition to the regular rent income. (b) VAT added to rental/paid by the lessee Any additional amount paid, directly or indirectly, by the lessee in consideration for the lease is considered rental. Therefore, taxes paid by the lessee on leased property are part of rental income of the landlord. (c) Advance rental/long term lease Advanced rental is a Security Deposit which restricts the lessor as to its use Advance rental is prepaid rental received without restriction as to its use The amount shall be “excluded” in the determination of rental income. The entire amount is “taxable” in the year it is received. 187 Taxes paid by the tenant (lessee) to or for a lessor for a business property are additional rent and constitute income taxable to the lessor.
63 7) Annuities, Proceeds from life insurance or other types of insurance Annuities Amounts payable yearly or at other regular intervals for a certain or uncertain period. They also represent as installment payments for life insurance sold by insurance companies. 188 Proceeds of life insurance Paid by reason of the death of the insured to his estate or to any beneficiary, 189 directly or in trust. Return of insurance premium 190 8) Prizes and awards Contest prizes and awards received are generally taxable. Such payment constitutes gain derived from labor. 191 188 If the part of annuity payments represent “interest” = taxable income. If the annuity is a mere return of premium = not taxable. 189 Individual, partnership, or corporation, but not a transferee for a valuable consideration. If the proceeds are retained by the insurer, the interest thereon is taxable; 190 If such amounts (when added to amounts already received before the taxable year under such contracts) exceed the aggregate premiums or considerations paid (whether or not paid during the taxable year), then the excess shall be included in the gross income. However, in the case of a transfer for a valuable consideration, by assignment or otherwise, of a life insurance, endowment or annuity contract, or any interest therein, only the actual value of such consideration and the amount of the premiums and other sums subsequently paid by the transferee are exempt from taxation. No loss is realized on surrender of a life insurance policy for its surrender value. 191 Exceptions: 1. Prizes and awards received in recognition of religious, charitable, scientific, educational, artistic, literary or civic achievements are exclusions from gross income if: a. The recipient was selected without any action on his part to enter a contest or proceedings; and b. The recipient is not required to render substantial future services as a condition to receiving the prize or award.
- Fall '14