How to handle PPM using TT Premier

[edster]

This is my first year investing in real estate.  I have bought shares in a PPM that distributes dividends through a K1.  I have yet to receive dividends at this point, but have invested money in 2020.  I have also incurred attorney fees when reviewing the company agreements,PPMs, and Subscription agreements.  I have tons of questions about how to put this into TT.   The money left my account and is now 100% at risk.   However, since I will not receive a K1 this year, let me just start with a few.

1.  Is there anything that I should be putting in this year?
2.  If there is, where does this go?  

In the future:
Will the K1 typically take into account my initial investment or is that something I need to do on my side?

Structure of the payout (if that matters)

We should be receiving about 8-10% dividends the first 2 years

Refinance happens at year 2-ish - we get 40-60% back then as a dividend (supposedly tax free as it is a loan)
year 4-5, sale happens.  Recoop 100% of investment plus 30-40% more. (assume get hit on taxes from 40-60% loan amount plus 30-40)

Worried that I am going to get taxed on my initial investment if I do not record things properly.

I keep seeing all these videos about turbo tax live with free help from a professional - wonder if that applies to the premier paid version...

[DianeW777]

Investments can be complicated and yet quite simple as long as the record keeping is maintained at every transaction from the first purchase to dividend income and/or reinvestment.

Dividends in tax terms is somewhat like interest, except they a share of a company's profits passed on to the shareholders periodically. One of the primary advantages of owning this type of investment is the regular payment of dividend income. When I use the word dividends it will be in this context. 

1. Without any tax income document, specifically a K-1 in your situation there is nothing to report.  An investment is not important to the IRS until it makes money or the purchase has been sold or redeemed.
2. For 2020 there is nothing to report, therefore nothing is entered on your tax return.

In the future:

1. The K-1 may show your capital account, however you should maintain an ongoing cost basis as you go along.  Any dividends that are paid directly to you are income, but not more investment.  If your dividends are used to purchase a greater share then they are taxable income and also, because of this, they are added to your initial investment which can make the record keeping difficult unless you are in the habit of maintaining up to the minute information.  Excel can be good for this.
2. Dividends are taxable income, however there is no deduction for providing a loan.  Any interest received on the loan could be taxable interest income separate from the dividends.
3. Your capital investment initially, as well as any capital contributed will be used to offset any sale or redemption when you want to get rid of this investment. At that time you will see that your investment is used to reduce your tax.
4. For this investment, the K-1 will be the document that provides all the information you will report on your tax return each year.