A Lessor Is Paid $45,000 by Its Commercial Tenant as a Lease

question 58

Multiple Choice

A lessor is paid $45,000 by its commercial tenant as a lease cancellation fee. The tenant wanted to get out of its lease so it could move to a different building. The lessor had held the lease for three years before it was canceled. The lessor had a zero tax basis for the lease. The lessor has received:

• A) Ordinary income of $45,000.
• B) Long-term capital gain of $45,000.
• C) Short-term capital gain of $45,000.
• D) Neither gain nor loss.
• E) None of the above.

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