Sidney Owns Unimproved Land in Chicago, Illinois

question 44

Essay

Sidney owns unimproved land in Chicago, Illinois. In 2005, Sidney leased the land for 10 years to the U-Store-It Storage Company. The lease terms require annual lease payments of $12,000 that are paid at the beginning of each year. U-Store-It immediately constructed a storage facility on the leased land. The storage facility building was worth $105,000 when it was constructed. In 2014, the lease expires and legal ownership of the building reverts to Sidney. The building is worth $125,000 when the lease expires. Sidney has reported the lease income annually, but will not report any income from the improvements the lessee made to the building. Explain in terms of the income tax concepts why Sidney has reported his income in this manner.

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Definitions:

Double Bind

A psychological predicament in which an individual receives two or more conflicting messages, and one message negates the other, making it difficult to appropriately respond.

Avolition

A lack of motivation or inability to initiate and persist in goal-directed activities, often seen in psychiatric disorders.

Atypical Antipsychotic Drugs

A class of medications used to treat psychiatric conditions, distinguished from earlier antipsychotics by their different chemical structure and lower risk of certain side effects.

Schizophrenia Symptoms

The clinical manifestations of schizophrenia, such as hallucinations, delusions, disorganized speech, and impaired cognitive functioning.