For now, just report the rent on that shed as a rent expense, until you actually gain ownership of your shed. Once you are officially the owner, then you can start reporting and depreciating the asset. Be sure to keep a record of all of your costs of improvements because will be added to the basis of your shed. The total basis is the basis of depreciation you will use to begin depreciation of your shed, once you fully own it. Meanwhile, report your rent as a miscellaneous rental expense and give a description such as rent expense for a right to own shed.
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