Investor · Folsom, CA · Member since 2010 · 85 posts · 9 votes
Hello,
I am doing my taxes right now and, under the "PERSONAL" category, I see "Interest and Dividends", under which there is "Interest from Seller Financed Loans". I reported the interest I earned from my notes there.
But, since I bought my notes at a discount, I also earned income from the notes due to the discount element. Where do I report that ?
I see a section at the bottom named "Miscellaneous Income, 1099-A, 1099-C", inside which there is "Other reportable income". When I enter my discount element there, TurboTax doesn't offset that income against past investment losses that I carried forward from past years.
It seems to me that a discount element from a note held for long term investments should be offset by investment losses carried forward from past years. And, therefore, that the "Other reportable income" should not be the section where I enter income due to the discount element.
Which brings me to the subject of this thread: How do you report income due to discount element in TurboTax ?
Your servicer should tell you how much interest they reported to the IRS. As to the discount, when you sell the note or it pays off, the difference between what you sold it for or what the payoff was, and your purchase price is your capital gain.