Based on the most recent facts provided by @heybrian you have the following:
- You provided equity into a venture. You need to understand what type of entity structure you invested in; partnership, LLC taxed as a partnership, or something else.
- If the entity is a pass-through entity you will receive a K-1 each year from this investment. The K-1 will then be used to prepare your individual 1040.
- You don't have any capital gain unless the entity generates a capital gain OR you sell your investment.
- The length of the project will dictate how the entity needs to report the income, loss, etc. which will flow through to you via the K-1.
- If this is a pass-through entity you need to make sure you maintain a basis schedule of your investment. This starts with your capital contribution and is updated annually for the applicable lines on the K-1.
- Once again, unless you sell your equity position (investment) you don't have any capital gain unless the entity generates a capital gain.
- You need to understand if you are receiving any type of preferred return. If so, you need to understand how that will be reported. This could be a guaranteed payment. If that is the case, you need to meet with a tax professional to understand the tax implications so there are no surprises or hard feelings.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
