On January 1, 20A1, Mangosteen leased its land to Gumamela for a period of 15 years for P200,000 monthly. Mangosteen also charged Gumamela real property tax (RPT) on the land for P20,000 monthly. Gumamela constructed a building on said land. The building was completed on October 1, 20A1 with total construction costs of P5,000,000, which represents its fair market value at the time of completion. The building will be transferred to Mangosteen at the end of the lease term. The building had an estimated useful life of 40 years. However, Gumamela terminated the lease on September 30, 20A8. It paid penalty of P1,200,000 for the termination of the contract. Required: Determine the annual gross income that will be reported by Mangosteen for the entire term of the lease under the two allowable methods in recognizing income.

On January 1, 20A1, Mangosteen leased its land to Gumamela for a period of 15 years for P200,000 monthly. Mangosteen also charged Gumamela real property tax (RPT) on the land for P20,000 monthly. Gumamela constructed a building on said land. The building was completed on October 1, 20A1 with total construction costs of P5,000,000, which represents its fair market value at the time of completion. The building will be transferred to Mangosteen at the end of the lease term. The building had an estimated useful life of 40 years. However, Gumamela terminated the lease on September 30, 20A8. It paid penalty of P1,200,000 for the termination of the contract. Required: Determine the annual gross income that will be reported by Mangosteen for the entire term of the lease under the two allowable methods in recognizing income.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter4: Income Exclusions

Section: Chapter Questions

Problem 76IIP

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