Individual Taxation - Schedule C

Question 1

Schedule C Reports

Answer 1

Reports Business Income and Expenses in Detail

Question 2

Supporting Schedules of Schedule C

Answer 2

Form 4562 Depreciation Deduction

Form 8829 Home Office Deduction

Form 1040 Summarizes all income into a single net income or loss at bottom of C, which carries over to first page.

Question 3

Net Business Income or Loss Calculation “FUNDAMENTAL ACCOUNTING EQUATION”

Answer 3

Business Income
\+ cash rec’d
\+ property rec’d
(-) Business Expense
(-) ordinary expense
(-) necessary expense

=Net Business Income or (Loss)

Question 4

Business Expense Deductions

Answer 4

-All Business Expenses
-Salaries/Wages (not owner’s or proprietors draw)
-Taxes Paid (State and Local Business Tax)
-Business Bad Debt (if accrual basis TP; NONE if Cash Basis)
-Interest Expense on Business Loan
-50% meals and entertainment
-100% of Travel Expense
a. Must allocate business vs pleasure
b. No deduction for AIR travel if primarily personal in nature (more than 25% personal)
$25 gift per year per recipient
$4 per promo item
Licensure
COGS
Depreciation of Business Asset 179 or MACRS
Rent
Operating Expenses

Question 5

Business Loss can only offset certain types of Income:

Answer 5

o Business Income
o Wage Income
o Rental Income

Question 6

Business Loss Carry - NOL

Answer 6

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