Lake Corp., an accrual-basis calendar-year corporation, had
the following 2012 receipts:

Advanced rental payments where the lease ends in 2014 $125,000

Lease cancellation payment from a five-year lease tenant 50,000

Lake had no restrictions on the use of the advanced rental payments
and renders no services. What amount of income should
Lake report on its 2012 tax return?

(d) The requirement is to determine the amount of
advance rents and lease cancellation payments that should be
reported on Lake Corp.’s 2012 tax return. Advance rental payments
must be included in gross income when received, regardless
of the period covered or whether the taxpayer uses the cash
or accrual method. Similarly, lease cancellation payments are
treated as rent and must be included in income when received,
regardless of the taxpayer’s method of accounting.