How to file taxes on a sandwich lease option

[Curt Smith]

Hi Guys, I searched BP for tax prep help, didn't find any tax prep helps for a sandwitch lease option.

Bought on a lease and option.  Zero option fee, lease is the sellers mortgage payment:  $798/mo.  I pay for fix ups.   

In 2014 about $4k in fix ups and did not rent on a lease and option till early 2015.  

Just guessing and figure I'm way off.  I use TurboTax by the way.

- New rental in Rental / Royalty section.  I have 10 other std rentals.

- purchase price = zero

- cost basis is stepped up by the 2014 fix ups pre renting.

- I may have paid one lease payment to the seller.  I don't know where to put this number?

This is all I need to get punched in for 2014.

In 2015 taxes:

- I took a $2.5k option fee.  I heard this is a non-taxable event since it's early sale money, that is handled at the actual sale date.  If no sale guessing it's income but at option expiration.

- I'm getting $925/mo rent but paying $798 to the owners.  Need to handle this?  Out of ignorance and guessing, I'd subtract the two and just file actual rent is the difference...  :)

- Had more fix up expenses in 2015 prior to renting.  I figure I'd add them as depreciated items.  New bathroom and electrical fixtures and painting.  I forget the depreciatoin period for a paint job?

tnx!

[Cameron Skinner]

@Brian Gibbons is correct you need a good tax professional, not those franchise brands, someone licensed who specializes in real estate and preferably owns some themselves.  turbo tax is designed for someone who owns maybe one or two conventual rentals and can not handle complex transaction like option contracts, because your asset is actually the contract itself which would normally be reported on schedule D and it sounds like your trying to treat as a rental property on schedule E.  Again I'm just guessing on the limited information you provided but you really need a tax pro.  I promise a good accountant will save you more in taxes than you will pay in fees.  Good luck!