I agree with Gene.

You are in the business of lending money and earning profits
on the difference of cost of the money you lend out and what
interest rate you charge.

The interest you are receiving is gross income that you
would report on Schedule C. The expenses would also be
reported on Schedule C, giving you either a net profit or
net loss on Schedule C.

Rudy
www.lizcanotaxservicesllc.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"eagent" <gene[at]alliancetax.com> wrote:
- quote -

I suppose it depends on the volume and how much time is
involved. Why aren't stock dividends Schedule C income?
That's just as much of a business as small loans.

Stu

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

eagent wrote:
- quote -

Your are right. I re-read the instructions for Schedule SE,
where it is clear that interest isn't investment income
when you are in the business of lending money or financing
the sale of your own goods or services. Bummer. I erroneously
believed that because interest is not normally subject to
SE tax this interest wouldn't be either. Does this mean that
a C corporation that lends money in the normal course of its
business isn't a personal holding company (lots of interest
income being one of the triggers for PHC tax)?
..

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"eagent" <gene[at]alliancetax.com> wrote:
- quote -

Gene is correct. If you're in the business of lending
money, then the interest income is ordinary income, not
portfolio income. To differentiate Sch B interest from Sch
C, lets say you work full-time (either employed or
self-employed) in a field unrelated to real estate and you
sold your house and took back a mortgage on it. That
interest would be interest from seller-financed mortgage and
reported on Sch B. However, the original post states that
you're doing private lending as a business, that interest is
ordinary income reported on Sch C income.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Bob wrote:

- quote -

What makes you think this ISN'T a Schedule C business
subject to self employment taxes?

What makes you different from banks or other financial
institutions that lend money in the normal course of their
trade or business?

I believe, without doing any confirming research, that this
activity DOES belong on a Schedule C.

Gene E. Utterback, EA, RFC

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I've been doing some real estate private money lending as a
small side business (sole proprietor). This isn't a Schedule
C business, as interest income isn't subject to self-employment
tax.

1) Where do I report the interest income? Schedule B?
2) Where do I report any deductible expenses (FedEx, interest
on money borrowed to originate loans, office supplies, etc)?
3) Where do I report losses (if I had to take a short payoff,
for example)? Section II of Form 4797 looks right, but I'm
not sure.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >