Posted by JOHN K HASLACH, CPA MST on May 14, 2004 at 14:12:26:
Based on the information you supplied, the money from the option is not income in the year you receive it as long as the option expires in a future year. The tax consequenses then will depend on whether it is exercised or not.
Lease-Purchase & Tax Treatement of Option Fee - Posted by R. Gardner
Posted by R. Gardner on May 13, 2004 at 22:05:27:
I own a house that I lease out. I provided an Option to Purchase the house to the tenant for a non-refundable option fee of $2000 at an agreed upon price of $200,000. The Option was valid for 14 months, and I agreed to reduce the specified purchase price by the amount of the option fee (i.e., by $2000) if the option were exercised. I also sold the house as part of a 1031 exchange. Question: What is the tax treatment for the $2000 option fee? Is it 1) simply treated as regular income in the year received? or 2)not treated as income when received, but treated as regular income at the time the option expires or is exercised? Or 3) some other way?