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How much leasehold improvement income should be taxable

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Reference no: EM133061399

Question - ABC, a Japanese residing in the Philippines, leased his property in Makati. The terms provide that should any improvements be made on the property, ABC would own the improvements. On January 1, 2021, the lessee constructed improvements amounting to 1,200,000 on the property. The improvements have a useful life of 8 years. 5 years remain on the lease. The fair market value of the leasehold improvement at Jan. 1, 2021 is 1,500,000. The fair market value of the improvements at January 1, 2021 is 450,000. How much leasehold improvement income should be taxable in 2021 using the outright method and spread out method? If the lease is preterminated on January 1, 2021, how much income from the leasehold improvement must be reported on Jan. 1, 2021?

Reference no: EM133061399

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