Therefore, no depreciation because this is "inventory property" and not "property used in a trade or business" which would be subject to depreciation. Good point. Still, as you say, the income must be declared. Appears that we talking about the dealer's "intent" in holding the property - for sale or for rent.
So the sale price later would be reduced by direct selling expenses and that is all. This purported industry practice of reducing basis (by the rent) and not reporting the rent income is, by all appearances, smoke and mirrors.