Yes, you should report this transaction as both income and expense for your Rental Property.
The total amount of rent you would have received is entered as Rental Income.
The value of the work you received and the cost of the materials are entered as Rental Expenses (Repairs/Maintenance). The value of the work would be the difference between the rent that should have been received and the rent that was actually paid.
For example:
Rental Income = $500 (enter as Income)
Reduced rent paid = $300
Value of work done in lieu of rent = $500 - $300 = $200
Cost of materials = $500
Total Repair Expense = $200 work + $500 materials = $700 (enter as Expense)
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