Passive investor in friends house flip - how to record income and not pay SE tax?

Forum|Forum|3 years ago
April 12, 2023
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I received a 1099 NEC for the profit I realized as a passive investor in a house flip done by a contractor friend. I invested the money in 2020, and in 2022 the house was finally sold, and I received my initial investment back as well a some money in profit on the passive investment. I did no work on the house myself. I received a 1099 NEC for the profits, but would rather consider the profit income as long term capital gains (which it really is) instead of self employment compensation (which it really is not, since this is the first and last time I will invest in something like this. I am long retired otherwise). Can anyone give me any tips on how or where to report the profit I realized on this investment so I am not paying 15% self employment taxes? Thank you in advance for any direction.

KrisD15

The IRS resurrected Form 1099-NEC Non-Employee Compensation JUST FOR contract/Self-Employed Taxpayers.

You can enter the 1099-NEC and select "This is not money earned as an employee or Self-Employed individual" which will eliminate Schedule C and Self-Employment tax.

@sdcarol

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