ADDITIONAL INFORMATION:

If I give my friend money towards an investment in their name (equal to 50% of the total investment of one share of a restaurant), how can we each report this on our individual taxes?

ATTORNEY ANSWER BY MARGARET L. CROSS:

The income generated will be reported on the owner’s tax return. You will not own any shares. What you are doing is making a loan to a friend who in turn makes an investment. His only obligation to you will be to repay the loan at some point. If your agreement isn’t in writing, you friend can easily claim that you had made a gift to him.  Your agreement should be set out in writing on how and when the money is to be paid back to you and at what interest rate. The agreement should be drafted by an attorney. If you are expecting a big return on your loan to your friend because this restaurant takes off, don’t. Invest in the restaurant under your own name if you want to secure the appreciation.

Legal Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on since each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship. A lawyer experienced in the subject area and licensed to practice in the jurisdiction should be consulted for legal advice.

Beliveau Law Group: Massachusetts | Florida | New Hampshire

The tax attorneys at the Beliveau Law Group provides legal services for taxation. The law firm has offices and attorneys in Naples, Florida; Waltham, Massachusetts; and Salem, New Hampshire.