<p>We have several multi family income properties from which we derive our family income. I'm trying to decide whether to report these as investments or businesses. Anyone out there with a similar situation - I would appreciate any comments.</p>
<p>BIG bump!! My husband owns 1/8 of rental property in another state with father, brother and other relatives - inherited from another relative. We get a small check for our share every year, and to be truthful it is a royal pain. I'd like a clue as to how we'd report it, because it is not like we could convince all the others to sell so I could use our share of the proceeds to pay for college.....</p>
<p>Check the recent changes made to the classifications of businesses. It seems that unless the business is substantial it would make little difference if reported as an investment or a business. This said, the main issue might arise from a reclassification of non-cash expenses flowing from the businesses/investments to your return. An example of this would be the elimination of depreciation expenses for financial aid purposes. Reported real estate losses might become income for finaid purposes. </p>
<p>The forms are pretty self-explanatory and not that hard to follow as they point to the item numbers of your tax returns.</p>
<p>I have a similar situation to Rachacha-- fractional share of family owned property acquired by inheritance. (In my case, it is a very small fraction, far less than 1/8). I do not report this as a "business" because I have no participation in the management or rents. My income is reported on a 1099, I report the income less expenses on a Schedule E so that part is reported as income. I report a <em>very conservative</em> figure as the value of the "asset" -- I did some research a number of years ago and found that appraisers typically deduct a factor for "minority" interests and "marketability" problems in such cases. </p>
<p>I think in the case of REInvestor, with multiple properties producing significant income, it might be better to be treated as a business - in that case, assuming the business has less than 100 employees, the property value may be exempted from consideration on the FAFSA, though it probably would be considered for CSS-Profile. But the way it is reported for taxes might have a big impact, since colleges will look at tax returns and will tend to follow certain conventions in that respect.</p>
<ol>
<li>Calculate the worst possible result you can imagine.</li>
<li>Pray for that plus $5k.
;)</li>
</ol>