That's an interesting question.  Give us some numbers.  Hypothetically, let's say the tenant has already paid $10,000 in rent and the landlord is giving him $5,000 for an early buyout.  (Doesn't really matter what that amount is supposed to cover.)  Then it's just a refund of (presumably) non-deductible expenses.  But what if the tenant has not even moved in yet, and is getting back his deposit plus more?  Then he has taxable income.  

Edited:  I don't know why I'm presuming this is residential, not business property.  Although you do say it involves an "apt".