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?
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!