As a real estate investor, my wife loaned 2 different people money for real estate endeavors. Each loan was secured by the properties in question. For the interest that my wife was paid on the loans, is that considered interest income (as in 1099-INT) or ordinary income?
2007-03-27 16:16:57 · 6 answers · asked by B 1 in Business & Finance ➔ Taxes ➔ United States
You can report it either way. Income and interest income are taxed at the same rate. There won't be any advantage or penalty involved in whichever way you report it. Uncle Sam just wants his cut.
If I have helped, I'd appreciate your vote.
Mike
2007-03-27 16:26:22 · answer #1 · answered by chimneygod 3 · 0⤊ 0⤋
I tried very hard to answer your question. I am an accountant.
The truth is that there are very many contingencies to tax, real estate involved law, and your question does not give enough detail for me to be able to give the correct answer there are about 5 places on your tax return, that you can put this, and I am only talking federal. So, what A real accountant would need to know would be, the details of you your agreement with the people, if it involved future earnings other than just the interst. And your wife intention on treatment. Is she, does she want to be, in the real estate/busines/rental busines.
There are just too many unanswered questions. Call the IRS honestly they are required to talk to you. But your best bet is to see an accountant, who will know the right questions to ask you, before you make a mistake on this. Good luck
2007-03-27 23:36:35 · answer #2 · answered by Chris 3 · 0⤊ 3⤋
I wouldn't consider it ordinary income. It is proceeds generated from a principle amount....just as is interest generated from the principle amt on a CD or other
investment....and I would consider a loan with interest
as an investment, whereas a loan without interest
is simply a loan. Think of it this way, when you take
out a CD, you are "loaning" your money to the bank
for them to use in return for interest.
2007-03-27 23:27:23 · answer #3 · answered by Northwest Womps 3 · 0⤊ 2⤋
I'd put it on the interest line - but interest is taxed as ordinary income.
2007-03-27 23:35:57 · answer #4 · answered by Judy 7 · 2⤊ 0⤋
Yes, money paid to you as interest is taxable, same as if paid by to you by a bank.
2007-03-27 23:21:08 · answer #5 · answered by frugernity 6 · 1⤊ 0⤋
H&R Block.
2007-03-27 23:18:54 · answer #6 · answered by Gogo 2 · 0⤊ 5⤋