Profit based loans

[JamesInGA]

I have a friend in the large machinery business and he contacted me about expanding inventory. So we struck up a deal where he finds machinery, I wire him the money to purchase it and when it sells, he wires me back my initial money plus 50% of the profit.  Since these wires are in the 20k-70k range, I assume the IRS is getting notified and they're going to want to know what's going on. So my question is, how do I treat the profit from the "loans" for tax purposes?

[PaulaM]

You could treat some of it as interest but the rest should be treated as Schedule C income.