Many alternatives exist (interest from savings accounts and bonds, dividends from publicly-traded and privately-owned businesses, rents from real estate, royalties from intellectual property).

When you do your schedule E (rents and royalties), after all deductions, mileage, depreciation, you should be a few thousand negative.

You should keep track of income and expenses to put together a profit and loss statement, which will ultimately go onto the schedule E (rents and royalty). 

From Biz findings "For losses of trade or business property, or property used to produce rentals or royalties, once you've calculated the amount of your loss and subtracted the amount of your reimbursement, the remainder is your deductible loss (or gain)."

Would rental loss and royalty loss be one of these? 

Retirement plans are designed for passive income like interest, dividends, royalties and rentals, but not for operating a business. 

@John Ross ValderamaI hope for your “partners” sake that he has a great lawyer to guide him through this.From what you described, unless your plan is to royalty screw him over, you guys should form a partnership. 

I think the final bonus offer will be $9k plus 25% royalties.

Our team of investors will work with you to get you top dollar for your cash flow notes; examples� �Real estate notes (lease purchase/fsbo (for sale by owner) �Annuities (structured settlements, lottery winnings, contest winnings, deferred sports contracts, some types of pension payments) �Royalties �Equipment leases �Accounts receivable factoring �Government contract payments Please contact us to schedule a phone consultation.

I strongly agree with RoyalT. I