Gross Income - Business Income or Loss, Schedule C
3 important questions on Gross Income - Business Income or Loss, Schedule C
What are examples of nondeductible expenses?
Nondeductible expenses include:
- Salaries paid to the sole proprietor (considered a withdrawal)
- Federal income tax
- Personal portion of:
- Automobile, travel, and meal expenses
- Interest expense: this may be reported as an itemized deduction if mortgage interest or investment interest is paid
- State and local tax expense: report as an itemized deduction on Schedule A
- Health insurance of a sole proprietor
- Bad debt expense of a cash basis taxpayer
- Charitable contributions: report as an itemized deduction on Schedule A
- Entertainment expenses
What can a business with a loss do regarding other sources of income?
A business with a loss may deduct the loss against other sources of income, subject to overall excess business loss and net operating loss limitations.
What is the presumption for an activity that is profitable for three out of five consecutive years?
The activity is presumed to be an activity engaged in for profit. The IRS has the burden of proving that it is not engaged in for profit.
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