The way that Sheena would have to report the rent she received as payment for use of these properties is: Passive income, reported on Schedule E. Option C
Passive income is income that can be maintained with little effort. It can come from a rental property, the stock market, or a business in which you have no direct ownership.
Rent payments should be reported on Schedule E as passive income, which should be documented. It is not regarded as business or investment income because she is not a real estate professional.
Net rental income or "revenue from a business in which the taxpayer does not materially participate" are the two definitions of passive income.
Investing in mutual funds or real estate, selling goods online, creating online courses, or engaging in various side jobs that don't require active participation are all examples of passive income streams.
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Sheena owns two rental houses. During the year, she was actively involved in managing the properties. The only services she provides are minor repairs and basic maintenance of the heating, cooling, electrical, and plumbing systems. She is not a real estate professional.
How should Sheena report the rent she received as payment for use of these properties?
Business income, reported on Schedule C.
Investment income, reported on Schedule D.
Passive income, reported on Schedule E.
Other income, reported on Schedule 1.
