asked

I have a client who has 30 secured notes and receives interest income from them (130K). The notes are secured by real estate, some of which are wrapped by other notes on which he pays interest (42K) to the wrap owners. He also has auto expenses (6K), legal expenses (9K), rent expense (16K), and repairs (32K). It is a 2-owner partnership. Prior accountant put interest income on K1 and interest expense and the remaining in Form 1065 as ordinary. I believe if anything, they all are investment interest and the rest investment expenses. Please advise.

November 6th, 2023

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