That's interesting I will run that by my CPA  .. loaning money is ordinary income the tax deferment at least what I read is for dividends and cap gains.. did not see anything about getting out of ordinary income or self employement tax.. 

@Brit F.

If you ever wanted a "reasonable and ordinary" business reason to buy a kayak, boat, jet skis, etc. you may have just found it!  

So you potentially would not be able to honor the rent to own or even an ordinary lease. 

Your income/loss is ordinary.

Hi there Brit and welcome to BP .  

@Brit Hale yes I do!

@Brit Hale If it's a great deal I would still go ahead and get it and turn it into a long term rental and then maybe at year 5 or 6, once you let it cash flow for a bit, go ahead and hire a lawyer and do a quiet title action and you should be good to go.

Plus, interest income is taxed at ordinary income rates.If your dad lives in a high tax state like New York, his combined federal and state marginal tax rate could easily be 40% or more.

@Reid MathewsGenerally speaking, if your rental activities rise to the level of a 'trade or business', any costs that are 'ordinary and necessary' for running a rental real estate business can be expensed.