I have a question about how to characterize money I received in a particular transaction for individual income tax purposes.
In 2010, I signed a lease-purchase on my house. The tenant/buyer paid a nonrefundable binder, which I received in 2010, that was to be credited to the purchase price when we close in 2011.
Also, a portion of each of the rental payments I received in 2010 was also to be credited to the purchase price at closing.
1. Is the binder income in 2010? If so, is it ordinary income or capital gain? This is a house I have owned as a personal residence for over 5 years.
2. Is the portion of the rental payments that are to be credited to the purchase price income in 2010? If so, what kind?
Not sure if this part matters: the tenant/buyer DID sign a real estate purchase agreement, although it has the usual financing contingencies.
Part B -
What happens if the tenant/buyer does not close in 2011? I assume the binder and rental payment credits would then become ordinary income. If so, for what year?
Thanks!