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Question

Profit based loans

1 reply
14 views

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?

Employee Tax Expert

Employee Tax Expert

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

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