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If I paid a business owner $10000 for the purchase of capital and in return and am being paid $150 per week for the next two years in return, how do I file these returns? Using a 1099-MISC?

Edit:

Thanks you for your replies! This is a real life situation. The capital in question is a car. One of several that the business owner operates as part of a taxi service. As part of the investment program, I helped the business owner purchase a car by wiring $10000 from my checking account to his. According to the business contract we signed, I am a "co-owner" of the car. In return I am being paid $150/week for two years via direct deposit to my checking account. After two years, I will continue to receive the same payments as long as shifts are being filled (drivers are hired to fill the shifts) for the car's operation. At the car's end of life (estimated 4-5 years from beginning of operation), the car will probably be sold and we will split the proceeds. I do not own any shares in his company.

The payments to me in 2014 were filed using a 1099-MISC form under "nonemployee compensation". I feel that my returns being taxed at the income tax rate is unfair and my tax preparer also suspects that they should not be filed under a 1099-MISC, but he could not tell me specifically alternative forms or options under which to file them. And that's why I am bringing my question here.

I've pretty much outlined the relevant details (to my knowledge) of our arrangement but I will ask the business owner for more information, if needed, in order to answer the question. Thanks again!

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    Welcome to the site photon. Is this a real life situation or an academic question you are looking for help on? In either case, I would suggest you fill out your question with more detail about what you have already started on and what you have already tried.
    – MrChrister
    Commented Apr 15, 2015 at 14:44
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    Is the business making dividend payments to you, or repurchasing the shares you acquired? How is the business treating those payments?
    – Chris W. Rea
    Commented Apr 15, 2015 at 15:18
  • Co-owner? Of the car? So, do you get the car back at the end of the two years, or do you get $10,000 (or some other lump sum amount) back then instead? Or is your only return from this arrangement the 104 weekly payments of $150 each?
    – Chris W. Rea
    Commented Apr 15, 2015 at 19:03
  • Chris, I added additional information at the bottom of the first paragraph under "edit".
    – photon
    Commented Apr 15, 2015 at 19:40

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This sounds like a rental fee as described in the instructions for the 1099-MISC.

Enter amounts of $600 or more for all types of rents, such as any of the following.

...

  • Machine rentals (for example, renting a bulldozer to level your parking lot).

Non-Employee compensation does not seem appropriate because you did not perform a service.

You mention that your tax-preparer brought this up. I think you will need to consult with a CPA to receive a more reliable opinion. Make sure to bring the contract that describes the situation with you. From there, you may need to consult a tax attorney, but the CPA should be able to help you figure out what your next step is.

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