McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 54

Ralph owns a building that he is trying to lease.Ralph is a calendar-year, cash method taxpayer and is trying to evaluate the tax consequences of three different lease arrangements.Under lease 1 the building rents for $500 per month, payable on the first of the next month, and the tenant must make a $500 security deposit that is refunded at the end of the lease.Under lease 2 the building rents for $5,500 per year, payable at the time the lease is signed, but no security deposit is required.Under lease 3 the building rents for $500 per month, payable at the beginning of each month, and the tenant must pay a security deposit of $1,000 that is to be applied toward the rent for the last two months of the lease.
a.What amounts are included in Ralph's gross income this year if a tenant signs lease 1 on December 1 and makes timely payments under that lease?
b.What amounts are included in Ralph's gross income this year if the tenant signs lease 2 on December 31 and makes timely payments under that lease?
c.What amounts are included in Ralph's gross income this year if the tenant signs lease 3 on November 30 and makes timely payments under that lease?