SEC. 5. TAX TREATMENT

.01 A rent-to-own dealer may report the income, gains, and losses from rent-to-own contracts within the scope of this revenue procedure as follows:

(1) Income (other than gain or loss described in section 5.01(2)) derived from those contracts is included in gross income as rental income pursuant to §§ 61(a)(5) and 1.61–8; and

(2) Gain or loss on the sale or other disposition of consumer durable property (including gain or loss from an early purchase payment described in section 3.03(6)) subject to those contracts is not treated as § 1231 gain or loss.

.02 The tax consequences of transactions structured by the parties as leases will be analyzed under applicable law without regard to this revenue procedure if:

(1) The transactions are not within the scope of this revenue procedure;

(2) The rent-to-own dealer does not report all items of income, gain, and loss from the rent-to-own contracts as specified in section 5.01; or

(3) The rent-to-own dealer does not apply the tax treatment described in section 5.01 of this revenue procedure to all its rent-to-own contracts within the scope of this revenue procedure.