Other Income or not?

[Johnny G]

I own, and am listed as general manager of an LLC. I am the only member. I deposited personal funds in the LLC account. I used the account to fund the purchase of houses at foreclosure by a third party which then remodels the home and flips it. I receive interest on the loan for the period they own the house as well as a 50/50 split of the gross profit. I have done only two deals total as of this year. I am full time employed in the military.

After considerable research it seems like a judgement call how to report this income. It can either be schedule C (Form 1040) as income from a trade or business or Line 21 (Form 1040) as other income. I have no associated costs to deduct. Obviously I would prefer to list this income as other so it is not subject to a 15% Self employment tax, but I also don't want to expose my self to an Audit, and be found to have done something illegal.

Some thoughts I had were, "are the scope of my LLC's activities so extensive as to rise to the stature of a trade or business?" and "does investing and managing my own money count as a trade or business?"

Chapter 5 of the IRS code states -"Interest received on a loan is business income if you are in the business of lending money" However I never created my LLC with the intent to start a money lending business. It was mainly to act as a legal barrier between these investments with individuals and my other personal collateral in the event of a lawsuit.