1099 misc

Forum|Forum|5 years ago
February 9, 2021
1 reply
7 views

My husband and 3 others were chosen to start a start-up. My husband left his employer and became an employee of the start-up and also owned a 1% share. In 2019, the start-up let my husband go so he went back to work for his former employer. He retained his 1% ownership share in the company. In 2020, the startup was purchased by another company. My husband had to sign off on the sale and he netted a portion and received a 1099. He didn't work for this company after he was let go in 2019 and had no say on the sale beyond signing off. I know I enter the income as other income but it wants to make him self employed where we pay that tax too. What is the correct way to enter this 1099 income since he was not self employed?

npierson777

Level 10

Yes, you should enter the income as Other income, it isn't self-employed income, since your husband didn't actively participate in the business in 2020. You'll have to pay tax on the gain on the sale of capital assets (partnership interest in your case).

To figure the gain, you need to know your basic in the asset. It is unclear from your question if your husband hold the 1% interest less that a year or more than a year. If it's short term, it is taxed as ordinary income, and if it was more that a year, it should be taxed as capital gain.

jewelmwiserAuthor

Level 2

Thanks for the response. My husband held the 1% interest for over a year. So in turbo tax, what section or how do I report it so it doesn't create a schedule C and charge self employment tax?