Thanks for this. I have a very similar case in which the ESOPs were cancelled as part of a cashless exercise and we received 1099-NEC for the transaction. I understand that the 1099-NEC amount is taxed as ordinary income.
Do I also have to pay self-employment taxes on this portion or is it just the income tax. As far as I can tell, this payment does not fall under IRS's definition of "You're in a self-employed trade or business if your primary purpose is to make a profit and your activity is regular and continuous.".
However, if not SE income, this 1099-NEC is being asked to be reported under line 8j of Schedule-1 which reads "Activity not engaged in for profit income". Is that correct?
