Taxpayers may be revisiting or renegotiating their contractual obligations, particularly for leases of real estate, business facilities, office space, and equipment, for a myriad of reasons. However, the parties may be unaware that the lease agreement modifications may have potentially significant tax consequences. When negotiating a lease modification, the landlord and tenant have the flexibility to write the modified agreement any way they see fit in regard to when rent accrues and when it is payable. This flexibility can allow the parties to use lease modifications to obtain a particular tax result or treatment.

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