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Updated 15 days ago, 12/09/2024

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Ali Mol
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5
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Question about Treating the Credit in a Lease-to-Own Agreement

Ali Mol
Posted

We signed a lease-to-own contract for 60 months. At the end of the term, we are obligated to provide a $100,000 credit at closing toward the purchase price for the buyer/tenant. This credit amounts to $1,666 per month, with the monthly rent set at $3,300.

From an accounting perspective, should the $1,666 per month be treated as a liability (deferred credit) and excluded from income, or should it be recognized as income and then applied as a credit at closing?

This property is owned by a multi-member LLC.

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