I have a client who is renting out their former residence and giving the renter a $1000 credit per month towards the purchase of the house at the end of a 2 year lease. The question is, did my client really sell his house or is he leasing it out? There doesn't seem to be a hybrid answer where the $1000/month is treated differently from the rent payment. The IRS has I think in this case said that you have one or the other and that the total monthly payments are either all rent or all payments on the sale of the house. We ended up here, treating all the payments as rent income, based on the circumstances. I good description of the rules is available from CIRE Magazine:   Lease Option