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Message: <blockquote data-quote="seenotes" data-source="post: 230229"><p>You'll want to sit down and talk this out with your friend...especially if the investment loan from you to him was not documented.  Did he pay you interest on the loan?  If so, you'll have some interest income to report and he'll have some investment interest to deduct.  If no interest was involved, the IRS could impute interest on the loan...lessening your capital gain (and his) on this investment.BTW, your capital gain could be either long-term or short-term depending on how long the restoration and sale took.  One poster assumed it was short-term w/o discussing the alternative with you.  An investment for over one year and you'll have long-term gain which is taxed at a significantly lower rate than short-term gain.Hope this helps.</p></blockquote><p></p>