There is a balance of 3 years on a ten year lease. Another tenant in the bldg wanted the space. Paid $50k to take over the lease. Owner of the building allowed us to out of the lease as long as we took another suite in the building and signed a new lease for three years on the new suite. Is this income or can it offset the rent expense for the remainder of 2011? We are a 501c3.

The tax rules for 501(c)(3) organizations is a specialized, niche area of tax expertise, so I suspect you will NOT get an answer to your question on THIS forum.

You need to consult with a tax professional who specilaizes in that specialized tax field.