Sched E - interest income

Goes on schedule B

We have a checking acct for managing a rental warehouse. The acct draws a little interest. Where on the Sched E (or elsewhere) do we put "interest income" earned from that acct ?

that's what I thought, but with the Sched E was hoping it might be embedded within the "biz" area.

The taxpayer ID on the 1099-INT is your/your spouse's Social Security Number & not a corporate entity (S-Corp), right?

Hi, ps56k.

This is an interesting question that we were concerned about when I was in active CPA practice 30+ years ago. I haven't followed it since, so I don't know if there are any current rulings, cases or other pronouncements about it.

It is an important question because, if the income is "profit from the trade or business", then it goes on Schedule C or E and probably is subject to the self-employment tax, as well as the income tax. But if it is income from an investment, then - as Scott said - it goes on Schedule B along with your other dividend and interest income.

If this business were in a corporation, then the interest would clearly be corporate income, reportable by and taxed to the corporation - unless it is a Sub-S or other specially-taxed corporation.

As I recall, we generally treated interest earned by a sole-proprietorship business as individual (Schedule B) income EXCEPT when interest income was an integral part of the business, such as from financing sales to a furniture dealer's customers.

Do YOU treat the rental warehouse as a "trade or business"? Do you have an EIN (Employer Identification Number)? (An individual who applies for and receives an EIN uses the same number for all his proprietorship businesses.) Does the Form 1099 from the bank report the interest as paid to your EIN? Or to your SSN?

My "memoirs" on this subject probably aren't helping you much, so I'll watch for someone to give us some current authority on the question.

RC

-- R. C. White, CPA San Marcos, TX (Retired. No longer licensed to practice public accounting.) snipped-for-privacy@grandecom.net Microsoft Windows MVP (2002-2010) (Using Quicken 2012 Deluxe R 5 and Windows Live Mail in Win7 x64)

We have a checking acct for managing a rental warehouse. The acct draws a little interest. Where on the Sched E (or elsewhere) do we put "interest income" earned from that acct ?

Interest Income in the majority of cases is "passive" income. In the OP case, the bank is paying interest on deposits from a property rental business. I doubt they are lending money, so Sch B is the only answer. Even if reported on a Form K-1, it will end up on Sch B. Scott

Hi, ps56k.

This is an interesting question that we were concerned about when I was in active CPA practice 30+ years ago. I haven't followed it since, so I don't know if there are any current rulings, cases or other pronouncements about it.

It is an important question because, if the income is "profit from the trade or business", then it goes on Schedule C or E and probably is subject to the self-employment tax, as well as the income tax. But if it is income from an investment, then - as Scott said - it goes on Schedule B along with your other dividend and interest income.

If this business were in a corporation, then the interest would clearly be corporate income, reportable by and taxed to the corporation - unless it is a Sub-S or other specially-taxed corporation.

As I recall, we generally treated interest earned by a sole-proprietorship business as individual (Schedule B) income EXCEPT when interest income was an integral part of the business, such as from financing sales to a furniture dealer's customers.

Do YOU treat the rental warehouse as a "trade or business"? Do you have an EIN (Employer Identification Number)? (An individual who applies for and receives an EIN uses the same number for all his proprietorship businesses.) Does the Form 1099 from the bank report the interest as paid to your EIN? Or to your SSN?

My "memoirs" on this subject probably aren't helping you much, so I'll watch for someone to give us some current authority on the question.

RC

-- R. C. White, CPA San Marcos, TX (Retired. No longer licensed to practice public accounting.) snipped-for-privacy@grandecom.net Microsoft Windows MVP (2002-2010) (Using Quicken 2012 Deluxe R 5 and Windows Live Mail in Win7 x64)

We have a checking acct for managing a rental warehouse. The acct draws a little interest. Where on the Sched E (or elsewhere) do we put "interest income" earned from that acct ?