Rental revenue recognition at end of year...

[Chris Martin]

This IRS topic defines rental income in this way: "Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income." The question is this. What does "you receive" mean? If you use a property manager (PM) then does the "you" mean the company and its agent(s)?

Here's an example. Company A, an LLC, employs a PM for lease fulfilment. On December 27, the PM leases a property owned by Company A, and PM receives rent and deposit. On January 10, the PM sends to Company A the monthly statement, including rent payments for the property leased December 27, and the company receives it on January 11.

In what year does Company A record the rent received? Is this simply a company policy decision?

[Steven Hamilton II]

If they receive the payment then the PM company should provide you with a full statement indicating the total amount they received(which you will report). This statement should also break down any expenses they paid out of those funds.

You received the income based upon constructive receipt. It was paid into "your account" with the PM company.

This is how it SHOULD be reported; however, not all small PM companies realize this and will not provide you with a detailed statement. So be sure that they are.

-Steven the Tax Guy