Intetest and Dividends

Interest and dividends may be considered business income. Interest received on notes receivable that you have accepted in the ordinary course of business is business income. Interest received on loans is business income if you are in the business of lending money.

Uncollectible Loans- If a loan payable to you becomes uncollectible during the tax year and you use an accrual method of accounting, you must include in gross income interest accrued up to the time the loan became uncollectible. If the accrued interest later becomes uncollectible, you may be able to take a bad debt deduction.

Unstated Interest-If little or no interest is charged on an installment sale, you may have to treat a part of each payment as unstated interest.

Dividends- Generally, dividends are business income to dealers in securities . For most sole properties and statutory employees, however, dividends are nonbusiness. If you hold a stock as a personal investment separately from your business activity, the dividends from the stock are nonbusiness income.

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