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- Oct 20, 2013
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Hello! I'm new here. I couldn't decide if this best fit in the general or the individual section, so hopefully I posted appropriately.
I am interested in investing in small local startups (think catering, computer service/repair, web design, etc.). I'm interested in using promissory notes as a tool for gaining a return from the startup owners, but in terms of taxes, I would like to treat it as just a personal investment and avoid creating a business around it (no Schedule C, SE, etc.). I've thought about not only investing money, but also offering assistance to the startup by getting them connected with the right people, helping them develop their business plan, creating forms, and providing general or specific business knowledge. My Questions are:
1) Can I treat the aforementioned non-monetary contributions as part of the investment and avoid "operating as a business." In otherwords, are these services considered business activity, solely investment activity, or is the discretion mine?
2) If considered investment activity, how would the return on such an investment be taxed. For example, if the return is y%, do I just claim interest income on my taxes for y% of (monetary investment + declared value of services)?
Thank you very much for any help you can provide,
Monk
I am interested in investing in small local startups (think catering, computer service/repair, web design, etc.). I'm interested in using promissory notes as a tool for gaining a return from the startup owners, but in terms of taxes, I would like to treat it as just a personal investment and avoid creating a business around it (no Schedule C, SE, etc.). I've thought about not only investing money, but also offering assistance to the startup by getting them connected with the right people, helping them develop their business plan, creating forms, and providing general or specific business knowledge. My Questions are:
1) Can I treat the aforementioned non-monetary contributions as part of the investment and avoid "operating as a business." In otherwords, are these services considered business activity, solely investment activity, or is the discretion mine?
2) If considered investment activity, how would the return on such an investment be taxed. For example, if the return is y%, do I just claim interest income on my taxes for y% of (monetary investment + declared value of services)?
Thank you very much for any help you can provide,
Monk