Taxes on Lease Option Judgment Award Money - How To Handle (Besides spend it) ;-)

[Mike Hern]

I was buying a rental property on lease option & making payments. Title had not changed into my hands.

I had it subleased and collected rents. I ended up having to sue for specific performance. I won. I forfeited my right to buy the property, in exchange for a monetary judgment. The judgment has been paid. This took 18 months spanning 3 calendar years.

Do I enter this on Sched C ?

Is it then taxable as Inventory

or as taxable as Business Income?