While there is not one set of rules the courts have applied in testing what constitutes a trade or business and there is no denial that the bar is set high, whether the client invests in mortgage receivables instead of stock market is ***not*** a relevant consideration.  There is clearly a profit motive here, there apparently are frequent and regular activities, it would appear that there is a fair amount of due diligence work and formalities that need to be carried out with each transaction, the quantum could be rather substantial, and there would be proactive management of the loans outstanding as well as collectibles.  These factors do point to these activities being more than passive investments.  This is different from incidental loans you extend to a neighbor.

If you believe this is reportable on Sch B only and no 1099-INT should be required, you can simply enter the "Name of Payor" and the amount received under "BANKS, S&L, ETC." on the Quick Entry screen for interest Income.