Originally Posted by TaxGuru
The IRS will not permit taxpayers who currently "rent to own" to deduct any interest expense for the duration of the period that he or she has not physically purchased the property and is actually renting a property under this arrangement.
It is generally the seller who has the right to deduct all the mortgage interest on the property, and the seller has to report rental income on his schedule. The rental income would correspond to all the rents that he has collected under this arrangement of rent to own with his lessee or tenant!
Assuming that scenario, if the agreement went to term, how does the transfer occur? on a sale of home or sale of business? What would the buyers basis be and how would the seller account for the sale of a rental property if all the income was reported as rental.