We had an investment in a DST structured apartment building. The "sponsor" of the DST for that building sold the building in 2023 and we reported the 2023 income/expenses as usual on a Schedule E and the capital gain in the appropriate place in Turbo Tax. The income and capital gain were treated/classified as passive income.
The sponsor held back funds in a reserve for potential post closing costs and distributed to us the balance in 2024 as a Monthly Distribution and the statement had the following language: Distributions represent your proportionate ownership in the Trust's net cash flow from operations after the payment of fees, expenses and contributions to the operating reserves for the month ended.
My first thought was to report this distribution as Miscellaneous Income on our 2024 tax return. However Miscellaneous Income cannot treated/classified as Passive Income. So am I correct to report this distribution on a Schedule E as Rental Income as the funds were generated by rental income before the building was sold in 2023?
Thank you for your assistance, Think57
