Do I need to report security deposit and last month payment?

[Andrew Great]

I purchased a property with a tenant at the end of 2016. At the time of closing the selling price was decreased by the total of the security deposit and last month payment. I didn't get money personally by paid less at the closing.

My question is do I need to add that amount that I was credited at the closing to my rental income and report to IRS?

[Rick S.]

@Andrew Great  I believe you would report the last month's payment as income for 2016 since you "received" it then.  You would only report the security deposit as income if you don't return all of it to the tenant once the lease ends.