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Case Study 1: Rental IncomeDuring the tax year, LaDonna signed a five-year lease to rent her property. In the first year, she received $5,000 for the first year's rent and $5,000 as the last year's rent in advance. If LaDonna uses the cash basis method of accounting, how much do you include in her rental income for the tax year? Click here for an explanation. If LaDonna received $5,000 for the first year's rent and $5,000 as the last year's rent in advance, you must include the entire $10,000 as rental income, because she received the entire amount in the tax year. The second $5,000 payment is included in income because it is advance rent and not a security deposit. 
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