If I understand what is involved in purchasing a royalty, you do not get to deduct purchasing the royalty as a direct expense. Rather, the purchase price of the royalty will be the basis which will determine how much gain you realize when you "cash in" the royalty. You will be taxed on your net gain, subject to capital gains treatments.
In this case you purchased the royalty for $10,000. No deduction now. However, if later you sell the royalty for $15,000, you will pay tax on the capital gain of $5000. Likewise, if you are unable to sell the royalty for 10,000, then you will claim capital loss on the difference. (The amount of capital loss you can claim in a year is capped as well. That's a topic for when you cash your royalty).
For additional information, please see this article: How is a capital gain or loss calculated?
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
