Discussion Archives:1099-PATR

I have a 1099-PATR that has a dividend reported in Box 1.

This dividend is solely related to a loan I have with Capatal Farm Credit for a piece of rural property.

I had about $3000 in interest expense on the loan last year that I do not deduct, because I am not itemizing. I am accruing the interest as part of my basis in the property.

Last year the IRS matched my 1099-PATR and then sent me a bill making adjustments on my Schedule C (my business is NOT related to this property) and adjusting my SE taxes!!! I'm obviously not receiving this as a result of any employment, only because I have a loan with this coop bank.

It seems to me that since this is a personal asset and that I am not deducting this from my income in any way (at this point) that the proper treatment is to accrue it as a reduction in my interest expense (therby lowering my basis).

Alternatively, many places I have read indicate one should report it on line 21 as other income with description as a dividend for a loan.

All I am trying to do is report it in a way that the IRS sees that I have acknoledged receiving the dividend, though it does seem unfair that I am paying tax on the money I paid the interest with twice, once when I originally earned it and then again when I got some of it back as a dividend.

Any suggestions? Thanks in advance.