The rental income should be entered as such and reported on Schedule E. Since you entered into an agreement to purchase the mobile home and you actually completed the purchase. For this reason you should add the mobile home as an asset and my advice would be to use 33% of the cost or the percentage of rented square feet to total square feet of the mobile home.
- Cost basis of property converted to rental use after personal use:
- Actual cost or the fair market value on the date of conversion, whichever is less.
- The mobile homes are considered personal property unless they are actually attached to the land.
Residential rental property. This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy.
Once you decide the cost basis to use, you will add the asset with one third of the cost basis, with a date placed in service as the date it became available for rent and then the purchase date. You can answer that you owned the property.
Expenses should be the same percentage as used to determine the rental portion of the mobile home unless there are expenses that were 100% for the rental area. Any asset that is purchased such as an appliance specifically for the rental area would be a separate asset with a 5 year recovery period.
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