My son gave his dad money to buy a piece of heavy equipment for his business.His dad promised a percentage of the profits made using this piece of machinery. His Dad gave him 15,000.00 for his profit and some money back on the equipment as he is paying him back so much a year on it and then the profit he makes will end when dad has paid him back. How does he file this money on his taxes as he has no paperwork other then receipts for it. Thanks

Your son LOANED the money to his dad, with re-payment terms based on future profits.

The re-payment of the money in excess of the loan amount is consider interest and should be deducted as such on Schedule C. The dad should report the interest paid on Form 1099-INT.

Your son should report the excess money as interest earned on a loan. The interest is reported as income on Schedule B.

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