Tax consequences of notes in LLC

[Jeffrey Mason]

Hi,

This is a tax question about notes. I guess what I did is put money into a hedge fund that buys real estate notes. I invested using money in an LLC that is taxed as a partnership (form 1065). So far I have been getting all the distributions and life is good.

However, now that I am doing taxes for 2014 (I extended), tax man says that that interest is subject to self-employment taxes.  That's roughly a 15% loss, so it's not exactly something that I'm happy with.  If I had known that beforehand, I probably would have just used personal money, which I believe would not have been subject to self-employment (or maybe it would?) because I just look at it as interest similar to interest earned at wells fargo, which would be ordinary income, but not subject to self-employment tax.  

Any tax professionals have any input?  If I had bought the notes personally, would that tax implications have been the same?