Tax Treatment of Gain from Discounted Note Purchase
I own a First Mortgage Real Estate Note with a face value of $90K. I paid $72K for the note, which has a balloon payment in 2 years. Does anyone know the tax implications, if any, when I realize the $18K gain from the discount on the Note? I have tried to research this in the IRS code and can’t seem to find anything that describes the treatment of this. Thank you in advance for your input.