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Level 1

reporting flipping house profit

I invest my money with my friend flipping the property, at the end of the sale he gives me my profit and 1099 misc, in column 7.   IS this correct?.  since I did not work with him or for him, I only invested money.   I am the only investor of the property and my friend take care of all the updating and selling work.   If 1099misc is not correct, then what form he should have given me.   I'm not a partner with him either.

1 Reply
Employee Tax Expert

reporting flipping house profit

If you are investing in the property in return for a percentage of the gain on the sale, you should be reporting this as a capital gain transaction.


You would report it under investment income and Stocks, Mutual Funds, Bonds, Other.


Since you have a 1099-Misc, you have to report it, I would suggest that you report it on a Schedule C as self-employment, but claim a deduction for the amount of the 1099 so that you have zero gain or loss shown on the schedule C.  You can call the deduction, 'reported as a capital gain'.


Your friend may be issuing a 1099 because he is deducting the amount he pays you from the gain he is reporting.  



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