Yes, you have two options for reporting a Rent-Back Agreement when purchasing a Rental Property.
1. Treat this as a reduction in the purchase price. This will lower your cost basis, which may be a factor when you sell the property in the future (increased gain on the sale).
2. Report this as Other Income on Line 21 of Form 1040. Most experts agree this is the more "correct" option. However, you are limited to reporting no more expenses than the income you enter for Line 21. See the instructions below for this option:
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