Hello, thank you in advance for any advice I receive. Currently I am in an owner finance situation on an improved lot in a housing development. The lot is still in his name. I am needing to now sell it and have a couple of options. I'm trying to understand the tax implications in order to choose the best option.

1) I bring a buyer to the financier. I get the equity I've already paid to him at closing and we split the profits over our original contract amount to which he will issue me a 1099 for my portion. Clearly the 1099 is income, but what about the return of my equity at closing? Is this taxable?

2) I take out short-term real estate loan to get the lot in my name and then sell it. I would take out the loan only on the amount owed to the owner financier with no down payment as the bank will loan 75% of the original loan amount which is met by my equity. Once I sell the lot, will all the proceeds over the loan amount be seen as capital gains?

Thanks again!