If you are adopting option A then you believe this is an investment loss. If it is an investment loss, as @Opus17 says above you can't enter the amount of loss until the final payout is received and the total is known. Then it is entered as a sale of an investment that has become worthless with a basis of the amount that you invested and a sale price of the amount that you recovered.
If, as in the example above, you received a partial payment in anticipation of a further payout down the line, you can't close out the investment yet. You will have to wait until the final payout is received.
So you can enter the 1099-MISC in the system as it has been received along with a corresponding negative amount under miscellaneous income that will zero out your income for this payment. The description would be 'return of investment capital' or something like that. Then, when you do close out the investment, you will need to reduce the basis for the investment loss by the amount that you received in this initial payment.
@TJ_ttax
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