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My brother proposed a question to me this morning. Some years back he purchased my share of the old family homeplace and became sole owner of the property. He rented the property for several years; however, at some point the renter (his son) expressed an interest in purchasing the house but didn't qualify for traditional financing options. Consequently, my brother made arrangements to basically carry the loan himself in the form of a rent-to-own arrangement.

In short, since at the point the rent payments meet the total agreed-upon sale price the rent payments will have already been taxed, and the related expenses (repairs, property taxes, insurance, etc) will have already been factored in to the taxes due, how does ones income tax return correctly reflect the sale of the home at the point the house is legally conveyed?
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