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Investor tax reporting

Please note: IRESE does not provide tax advice. The following provides an overview of IRESE's tax reporting process for the benefit of investors. Each taxpayer's situation is unique; please consult your tax advisor for more information.

Do I have to pay taxes on the money I make at IRESE?

Your income from Real Estate Note interest is taxable income. Each tax year that you earn $600 or more in interest or $600 or more in investor fees, IRESE will send you a Consolidated Form 1099 summarizing your taxable interest income or taxable fees, and will report this 1099 information to the IRS. (In some cases, amounts less than $600 may be reported to state tax authorities based on individual state requirements, see below.)

Regardless of whether the interest income or fees are greater than or equal to $600, you are required by law to report these amounts on your tax return.

How is IRESE characterized for tax reporting purposes?

For purposes of interest income reporting, IRESE reports as an intermediary, known as a "nominee recipient" under IRC sec. 6049. Nominee recipients are responsible for reporting via forms 1099 proceeds which are ultimately disbursed to recipients. This is the same method of reporting used by stock brokerages.

Does IRESE report activity on a cash or accrual basis?

IRESE reports interest income, trading proceeds or option payouts on a cash basis, not on an accrual basis. This is required by the Internal Revenue Service.

What are the tax impacts from trading options?

At a minimum, if you sell an option you will incur a capital gain or loss. Whether it is a short-term or long-term capital gain or loss depends on how long you held the option. Purchases and sales of call and put options should be reported on your schedule D.

You should consult with your tax advisor regarding the IRS Schedule D and any related tax liability. Additional information regarding tax reporting for securities trading can be found in the following IRS publications:

Please note: Options involve risk and are not suitable for all investors. Before investing in options, please read the Characteristics and Risks of Standardized Options.

What forms and statements will IRESE provide for tax preparation purposes?

IRESE provides a year-end investor statement to all active investors, and may provide a Consolidated Form 1099 to investors and tax authorities, depending on the investor's activity during the calendar year.

Year-end investor statement

An end-of-year investor statement will be created to provide investors with the tax-related metrics for their investing activity during the previous year.


You will receive a form 1099-INT in each tax year that you earn $600 or more in interest, unless you live in a state for which there is a reporting exception (see below).


You will receive a form 1099-MISC in each tax year that you receive $600 or more in late fees or Broker's commission, unless you live in a state for which there is a reporting exception (see below).


You will receive a form 1099-B which details each transaction in which you have had Real Estate Notes traded or redeemed and Real Estate Options traded or redeemed.

The following states have exceptions for reporting thresholds, as outlined in the following table:

State 1099-INT 1099-MISC
Arkansas If ≥ $100 interest received -
California If ≥ $10 interest received -
Colorado If > $0 interest received -
Connecticut If > $0 interest received If > $0 income received
District of Columbia If > $0 interest received -
Delaware If > $0 interest received If > $0 income received
Hawaii If > $0 interest received -
Iowa If > $0 interest received -
Idaho If > $0 interest received -
Kansas If > $0 interest received -
Kentucky If > $0 interest received If > $0 income received
Massachusets If > $0 interest received -
Michigan If > $0 interest received -
Minnesota If > $0 interest received If > $0 income received
Montana If > $0 interest received If > $0 income received
North Carolina If > $0 interest received -
North Dakota - If > $0 income received
Oklahoma If ≥ $500 interest received If ≥ $500 income received
Oregon If > $0 interest received If > $0 income received
Puerto Rico If ≥ $500 interest received If ≥ $500 income received
South Carolina If > $0 interest received -
Virginia If > $0 interest received If > $0 income received
Vermont If > $100 interest received If > $100 income received
All other states No special tax reporting for other states.

When and where will I receive my tax forms?

If you are subject to 1099 tax reporting, your tax forms will be available on the "My Account > Statements" page by January 31 of the year following the calendar year in question. For example, your 2008 tax forms will be available by January 31, 2009.

If you would like to receive a paper copy of your tax forms, please contact customer support.

What if I have had Real Estate Note default and the property foreclosed?

The gross proceeds from any foreclosure sale will be reported to investors in a year-end investor statement, and will also be filed on tax form 1099-B. Using the note principal balance before sale and the sale amount (which are available on the year-end investor statement), investors can calculate their net amount of loss, if any, for the year. Investors are encouraged to consult their tax advisor to determine their tax basis on default notes.

Delinquent (late) notes which have not yet been foreclosed will have no impact upon taxes until further action on these notes takes place.

My forms have my SSN on them. Can I use a different tax ID?

Yes. When you joined IRESE and agreed to the IRESE investor agreement, you choose how your earnings and losses from your activity on IRESE would be assigned, to your Social Security number (SSN) or Employer Identification Number (EIN). IRESE is required by the IRS to report in this manner.

What if I do not file my taxes on a calendar year basis?

You should consult your tax advisor to determine the methodology behind adjusting your 1099 to reflect a non-calendar tax reporting. IRESE is required by the IRS to report on a calendar year basis.

Will I have to pay state taxes on my IRESE earnings or losses?

This depends on which state income taxes you are subject to. Please consult your tax advisor for more information on this matter.

What if I have a question on any of the amounts shown on my tax forms or end-of-year statement?

Please contact customer support if you have a question on any of the values which are reported on the IRESE-generated tax forms or end-of-year statement.

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