Tax On Lease Option Deposit And Option Money???
Hi,
Says I have a L/P with a tenant/buyer; I receive $15,000 depositt, $1500 rent/month, and $300/month option. At the end of the year to file tax return, do I consider $15,000 and the $300/month as income?
thanks.
I fon't get L/Ps.
This person gave you 15K plus 1800/mo.
What does he get?
I am concern about the option money and deposit. Do I need to report these as passive income?
This would probably be a good question to ask a CPA. I don't know that I would trust just anyone posting on this forum.
My thoughts would be that if the money is staying in a trust account and not being spent you could arugably say that it is not income, until they buy the home.
If you are realizing it right now (i.e. spending it) you should probably report it as income.
I guess it would also depend on your accounting method. You are probably using cash accounting (as opposed to accrual). So you would only count profit at the point you receive it. Which would go well with what I said above.
If you have any other questions let me know.
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What is the $300/mo. option for?
The rent is income, but the Option Consideration is not taxable until either you are cashed out or the Contract is defaulted.
If you are in a sandwich Lease situation, the rent would be regular Schedule C income (unless you are incorporated). No deductions other than regular business deductions (you could deduct rent payments to Owner as expenses). If you own it (or have the Deed), you get the depreciation and can deduct taxes and insurance.