Best tax approach on rehab

[Calvin N.]

We purchased a non performing note, first position, on a SFH in Feb 08. We went through the foreclosure process and took possession on the property, May 08. After an extensive rehab (90K) completed before the end of 2008, it is ready to sell or lease.

How do we record this on our tax return for this year? Do we show it as a rental purchase, add the renovations as depreciating items, and no rental income? I have other rental properties that I have done renovations on but not to this extent. Thanks for the advice.