Posted by Dave T on March 05, 2000 at 23:16:08:
I would have treated the rent credit as additional option consideration and therefore a deposit against the purchase price. Option consideration is not taxable until the option either expires or is exercised. If the option is exercised, the option money is included in the sales price of the property sold.
The reason here is that I pay tax on rent income at my marginal tax rate. If I treat the rent credit as a deposit, then it becomes part of the profit on the sale and subject to capital gains taxation when the option is exercised – a much lower tax rate for me. Of course, if the option expires, then the option consideration is ordinary income to the seller.
Since you already reported the rent credit as taxable income, then just increase your basis accordingly to show a $4800 smaller profit on the deal.
I am not a tax professional. Suggest that you review this strategy with your tax advisor.