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I gave a friend of mine x amount of money to buy a house for…

I gave a friend of...
I gave a friend of mine x amount of money to buy a house for investment , when he sold the house he gave me back my money plus some more (x+b) x = capital, b ( represents the additional money i received)
How should I report this money in my income tax? as a interest? or how? is this money subject to self employment tax? what is the legal and the best way to record this money in my income tax.
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3/14/2018
Richard
Richard, Tax Attorney
Category: Tax
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Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

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Good evening. What kind of written agreement did you have with this friend?

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Customer reply replied 1 month ago
none gave the money to him and he returned the principal and some more

One, it would not be subject to self-employment tax because it's not compensation for services performed. You could actually take a couple of approaches. One, you could treat this as a loan for which you were repaid principal and interest; in that case, you would treat the additional money as interest income. Two, you could take the position you had a verbal partnership agreement with your friend; in that case, the proceeds in excess of your investment (i.e., your basis), would be a capital gain...long term if 12 months or more; short term if under 12 months. In that case you would report this as a sale of a capital asset and report it on Form 8949 and Schedule D to be attached to your Form 1040. Given no written agreement and no K-1 from your friend evidencing a partnership, the more appropriate treatment would be alternative number 1.

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Thank you so much for the 5-star rating! I know rating takes an additional step and I truly appreciate you taking the extra time! It's been my honor and privilege to help you with this. If I can help you in any way in the future, I'll be happy to help. For easy access, my bookmark is: www.justanswer.com/law/expert-legalbeacon/ . Or, simply request “Richard only” in the first line of your question.

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Customer reply replied 1 month ago
Do I need to wait for 1099InT or I could file my taxes and added as a 1099 int without the payer information

Since you know the amount, you can file your return now. :)

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