tax treatment for lease option income

[Teresia Sayler]

What is the tax treatment for the different income streams from Lease Options?  Is the Option fee self employment income (business income) when rec'd by a "future potential buyer"?  Can the monthly income be "rental income" reportable on schedule E, even if you don't own the property yet,  as in a sublet situation (you yourself are in a lease option arrangement on the same property)?  If so, you'd be able to deduct the rental payment you make to the seller if you yourself are subletting, until you exercise the option, as well as any other normal landlord type expenses?