1099 MISC - BRAIN FART

[WITAXLADY]

so landlord has 5 rentals

is he in a trade or business?

does he need to issue 1099's for services?

 

he sells a house on land contract - is this as an individual or trade or business? Does he need to report the interest on a 1099 int to them?

 

how many makes it a trade?

None unless he is a broker?

Thx

[mcb39]

I have a client who is buying a rental house on a land contract.  He had two, but had built up enough equity to get financing on the first one.  He DOES receive a 1099 interest from the individual who is selling it to him.  It is not a trade or business.  It is a Sch E Rental of two properties.  In 2013 he sold one rental to his brother.  That is a CG sale of property and has its own formula.  Fortunately, for me, I also have the brother as a client, so all numbers agreed.  I do not have the original holder of the land contract as a client, but he does issue the 1099 to my client every year.  (Client sold the property that he had already gotten financing on himself) 

[mcb39]

so landlord has 5 rentals

is he in a trade or business?

does he need to issue 1099's for services?

 

he sells a house on land contract - is this as an individual or trade or business? Does he need top report the interest on a 1099 int to them?

 

how many makes it a trade?

None unless he is a broker?

Thx

 

In my cases, it is an individual who issues a 1099 interest and claims it on his personal return as interest income.  I have several parties who are paying mortgage interest to private parties and all are reported the same.  I don't know what the criteria is to make it a business, other than being in the Professional Real Estate Business. 

[kcjenkins]

so landlord has 5 rentals

is he in a trade or business?  NOT UNLESS HE'S PROVIDING SIGNIFICANT SERVICES

does he need to issue 1099's for services?  I WOULD

 

he sells a house on land contract - is this as an individual or trade or business?  PERSONAL

Does he need to report the interest on a 1099 int to them?  YES

 

how many makes it a trade?

None unless he is a broker?

Thx

[Lion EA]

If you're also asking about Forms 1099-MISC, that law got undone before it became effective.  Schedule E types do not have to send 1099-MISC to their vendors.  I used to urge my landlords to send 1099s to have a better paper trail.  Currently, I don't think I have anyone with a Schedule E Page 1.

 

Isn't a sale of a rental home a 4797 transaction?

[Lee B]

If you're also asking about Forms 1099-MISC, that law got undone before it became effective.  Schedule E types do not have to send 1099-MISC to their vendors.  I used to urge my landlords to send 1099s to have a better paper trail. 

 

According to the speaker at a OSCPA seminar that I went to in January , the ongoing status of  the 1099 Misc

 

requirements with respect to landlords is unclear due to the way the various rules & regulations are tangled up.

 

Basically he said that at first glance it appeared that the requirements were removed, but that a closer reading

 

left real doubt. His said that he was having all of his landlord clients file 1099 Misc until such time as the

 

situation became clearer.

[Gail in Virginia]

I don't think that you can ever get in trouble for sending a 1099MISC when you are not required to, but if you fail to send one that is required there are definitely penalties.  So I strongly encourage my clients who even remotely might be required to file the 1099MISC to go ahead and send it.  As long as you get the numbers right, the other party should be reporting the income whether they receive a 1099MISC from your client or not, so it should not make a difference to them and might keep your client out of trouble.  So why not?

[mcb39]

If you're also asking about Forms 1099-MISC, that law got undone before it became effective.  Schedule E types do not have to send 1099-MISC to their vendors.  I used to urge my landlords to send 1099s to have a better paper trail.  Currently, I don't think I have anyone with a Schedule E Page 1.

 

Isn't a sale of a rental home a 4797 transaction?

 

Yes it is.  I mistyped on the CG wording.  The gain is usually pretty hefty too, depending on how long he has been depreciating and how much more he gets for it than he paid.  However, seller does usually walk away with equity.

[WITAXLADY]

so on a land contract - you are advocating filling out a 1099-S for the sale the year it occurs?

 

as well as the 1099-interest each year so the interest matches up with the Sch B?

[mcb39]

In the case I had in 2013, the rental had already been refinanced by a bank and the land contract was paid off; so the 1099-S came from the bank.; to the seller.  In prior years, my client had always received a 1099-Int from the holder of the land contract so he could deduct it on the Sch E.  My client never sent a 1099-interest to the holder of the land contract.  We had an amortization schedule that matched the sellers.

 

This year, my client will not have to issue a 1099-interest as he did not sell it on a land contract to his brother.  That will be up to the bank. 

 

I have another client who is buying land on a land contract.  Every year, he receives a 1099-interest from the seller.  In fact, one year we had to produce that 1099 for the IRS as they were questioning his home mortgage interest deduction.  The land is adjacent to his home.  Have no way of knowing if the seller was reporting the income or not.  He made out the 1099-int, but may have never filed it. (Seller is not my client)