@fsteincpa wrote:
I actually agree with the previous post. To me, it is recovery/reduction of expenses and not truly rental income. I just want a cite to support my belief. lol
The business owner leases from the owner of the building, pays rent but does not utilize the entire space so the business owner sublets part of the space to an unrelated party (i.e, not connected with his/her business). There is no reduction if the business owner reports 100% of the rent paid as an expense and then reports 100% of the rental income received by the sublessee.
If the business owner pays $1000/month to the building owner and collects $500 from the sublessee, then the business owner has a $1000/month rent expense and reports $500 in rental income (in this case the entire transaction is a wash - between the method of reporting outlined and just reporting $500 as a rent expense).
