1099 Misc for Investment Income

[equinecpa]

I have a client who is basically a silent investor in a corp that buys/sells foreclosed properties. Last year he received a 1099-misc to document his earnings, the amount is in box 3 Other income.

The figure in this box represents his portion of the profit on his investment. I'm surprised it's reported on a 1099 Misc -where would you report this? Would you report it as other income?

[ED SMITH]

Yes. Report it is other income - Line 21.
If it is an S-corp it would be ordinary income on a K-1; and if it is a regular corp. it would be ordinary dividends. The end result is the same.

[Snaggletooth]

Question for Ed

The end result is the same.

I first wondered that treatment as C corp dividends would entitle the recipient to a 15% ceiling. But not necessarily true, and NOT true if the dividends are not "qualifying" dividends.

Ed if the investment is a public security, what is there about the paying entity which denies "qualifying" treatment?

[ChEAr$]

Assuming of course corporation actually paid him

Yes. Report it is other income - Line 21.
If it is an S-corp it would be ordinary income on a K-1; and if it is a regular corp. it would be ordinary dividends. The end result is the same.

the money, right?

Or, I guess, they might have taken the money and kept it, selling him more stock.