Q: If partner and I enter into mortgage and I periodically “buy” equity from him until we are 50/50 owners, is that income?

A: No, it doesn't sound like it. What it sounds like is happening is that you are paying him something and relieving his obligation. So in other words, if you are paying him cash that you received that was already taxable, you are just investing the cash in an increased interest in the project. He, however, will have a recognition event. When he sells a certain portion, we will do a gain/loss calculation based on his taxable basis in the property.

With all that said, all bets are off if your increased share is a result of you providing him labor (services). So, for example, if he gives you an extra 1% interst, and that 1% interest is valued at $5,000, then you would have impuited income to the extent of $5,000 (and it may be taxed as self-employment income in addition to earned income) even if no actual cash changed hands. On the flip side of the coin, he would be able to deduct $5,000 as a labor expense from his taxes, and he may also have to go that gain/loss calculation discussed above since it is effectvely the sale of property received for $5,000.

So it depends on what is changing hands. If you are just giving him cash, then it would not be taxable to you (as it should have already been taxed).

Disclaimer: I don't know all facts, have not reviewed any documents or arrangements, and I have to make many assumptions. This is not tax advice but general questions answered to the best of my ability based upon the facts presented, many of which may be inaccurate or not fully illustrative of the situation.