There are many issues which landlords and tenants must negotiate in commercial leasing transactions. In the first two parts of this article, which deals with the tax treatment of important lease terms, we discussed lease inducement payments and tenant construction allowances. In this part, we will conclude our discussion of lease termination payments.

As mentioned earlier in this series of blogs, there are two types of lease termination payments: (1) payments made by the landlord to the tenant and (2) payments made by the tenant to the landlord. Part three addressed payments made by the landlord to the tenant. This final section will consider lease termination payments made by a tenant to a landlord.

This is a preview of Tax Treatment Of Lease Terms Part 4: Lease Termination Payments From Tenant To Landlord. Read the full post (460 words, 1 image, estimated 1:50 mins reading time)

There are many issues which landlords and tenants must negotiate in commercial leasing transactions. In the first two parts of this article, which deals with the tax treatment of important lease terms, we discussed lease inducement payments and tenant construction allowances. In this part, and the next, we will briefly discuss the importance of lease termination payments.

Generally, I.R.C. § 263 disallows a current deduction for amounts chargeable to capital account. The applicable Tax Regulations provide that a taxpayer must capitalize amounts paid to another party to terminate a lease of real property between the taxpayer-lessor and the lessee. However, these regulations fail to discuss whether the payment is a nondeductible capital expenditure or whether it is amortizable and, if so, for what period is it capitalized into the cost of the building?

This is a preview of Tax Treatment Of Lease Terms Part 3: Lease Termination Payments From Landlord To Tenant. Read the full post (535 words, 1 image, estimated 2:08 mins reading time)