On September 30 201 XXX Company rented to a tenant a small office space in its Dilapitated Visions Complex. The tenant is not obligated to continue the lease beyond Summer 202 but pays $25000 cash upfront towards the $1000 monthly rent (25 months rent received in advance). This is not a capital lease. Excluding income taxes and the income effects of this rental XXX Company has (GAAP and Tax) income of $111111 in 201 $222222 in 202 and $333333 in 203. The IRS requires rent to be included in taxable income in the year received The income tax rate is a flat 10% for all relevant years. At January 1 201 the balance sheet showed Common Stock of $444444 Retained Earnings of $555555 and zero Accumulated OCI. The only change to Common Stock during these three years was an issuance of $88888 of stock at par value in 202.
