Reporting Hard Money Income

[Kevin Schick]

Hypothetical scenerio: Lend someone $20K which they use to purchase/rehab/sell property. Deal is I get 20% of their profit. I am not listed on property deed. They clear $10K, so I now have $2,000 income.

If I have a single member LLC, where would this be reported in my 1040?

1. Interest income? Basically saying I made 10% interest on the loan of $20K.

2. Sched D, investment income? But I never bought anything and sold it?? Unless this is implied ownership of property the other person bought.

3. Not Sched E since it is not a rental property ...

And then followup question. I can do this within an S-Corp, or I can do this within the LLC. Any advantage one way or the other, since regardless this is short-term income, taxed at ordinary rate.

Thanks...