2004 Instructions for Form 1040 (ALL) - Supreme Law Firm

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percentage of the charges for that line, in- business travel and 50% of your business are protected against loss by a guarantee, cluding the base rate charges. meals and entertainment. But there are ex- stop-loss agreement, or other similar arceptions and limitations. See the instruc- rangement (excluding casualty insurance tions for Schedule C, lines 24a through 24c, and insurance against tort liability). on page C-5. Lines 34a Through 34f • Amounts borrowed for use in the ac- Preproductive period expenses. If you had tivity from a person who has an interest in Include all ordinary and necessary farm ex- preproductive period expenses in 2004 and the activity, other than as a creditor, or who penses not deducted elsewhere on Schedule you decided to capitalize them, you must is related under section 465(b)(3) to a per- F, such as advertising, office supplies, etc. enter the total of these expenses in paren- son (other than you) having such an inter- Do not include fines or penalties paid to a theses on line 34f and enter “263A” in the est. government for violating any law. space to the left of the total. Subtract the If all amounts are at risk in this business, At-risk loss deduction. Any loss from this amount on line 34f from the total of lines check box 37a and enter your loss on line activity that was not allowed as a deduction 12 through 34e. Enter the result on line 35. 36. But if you checked the “No” box on line last year because of the at-risk rules is For details, see Capitalizing costs of E, you may need to complete Form 8582 to treated as a deduction allocable to this ac- property on page F-3 and Pub. 225. figure your allowable loss to enter on line tivity in 2004. 36. See the Instructions for Form 8582. Bad debts. See Pub. 535. If you checked box 37b, see Form 6198 to determine the amount of your deductible Business start-up costs. You can elect to Line 36 loss and enter that amount on line 36. But if amortize certain business start-up costs If you have a loss, the amount of loss you paid or incurred before October 23, 2004, you checked the “No” box on line E, your can deduct this year may be limited. Go on over 60 months or more beginning with the loss may be further limited. See the Instruc- to line 37 before entering your loss on line month your business began. For certain tions for Form 8582. If your at-risk amount 36. If you checked the “No” box on Schedbusiness start-up costs paid or incurred afule F, line E, also see the Instructions for is zero or less, enter -0- on line 36. Be sure ter October 22, 2004, you can elect to deto attach Form 6198 to your return. If you Form 8582. Enter the net profit or deductiduct up to $5,000 for the year your business checked box 37b and you do not attach ble loss here and on Form 1040, line 18, began. This limit is reduced by the amount Form 6198, the processing of your tax re- and Schedule SE, line 1. Estates and trusts by which your start-up costs exceed turn may be delayed. should enter the net profit or deductible $50,000. You can elect to amortize any reloss here and on Form 1041, line 6. Partner- Any loss from this activity not allowed maining qualified business start-up costs for 2004 because of the at-risk rules is ships should stop here and enter the profit over 15 years. For details, see Pub. 225. For treated as a deduction allocable to the activ- or loss on this line and on Form 1065, line 5 amortization that begins in 2004, you must ity in 2005. (or Form 1065-B, line 7). complete and attach Form 4562. For details, see Pub. 925 and the If you have a net profit on line 36, this Business use of your home. You may be Instructions for Form 6198. amount is earned income and may qualify able to deduct certain expenses for business you for the earned income credit if you use of your home, subject to limitations. meet certain conditions. See the instruc- Use the worksheet in Pub. 587 to figure tions for Form 1040, lines 65a and 65b, for your allowable deduction. Do not use Form details. 8829. Part III. Farm Clean-fuel vehicles and clean-fuel vehicle Income—Accrual refueling property. You may be able to deduct part of the cost of qualified clean-fuel Line 37 Method vehicle property used in your farming busi- At-risk rules. Generally, if you have a loss If you use the accrual method, report farm ness and qualified clean-fuel vehicle re- from a farming activity and amounts in the income when you earn it, not when you fueling property. See Pub. 535. activity for which you are not at risk, you receive it. Generally, you must include aniwill have to complete Form 6198 to figure mals and crops in your inventory if you Forestation and reforestation costs. You use can elect to amortize certain forestation and reforestation costs over 84 months. You can also elect to expense up to $10,000 ($5,000 if married filing separately) of certain forestation and reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. The amortization election does not apply to trusts and the expense election does not apply to estates and trusts. For details, see Pub. 225. For amortization that begins in 2004, you must complete and attach Form 4562. Legal and professional fees. You can de- your allowable loss. The at-risk rules generally limit the amount of loss (including loss on the disposition of assets) you can claim to the amount you could actually lose in the activity. Check box 37b if you have amounts for which you are not at risk in this activity, such as the following. • Nonrecourse loans used to finance the activity, to acquire property used in the activity, or to acquire the activity that are not secured by your own property (other than property used in the activity). However, there is an exception for certain nonrecourse financing borrowed by you in con- nection with holding real property. • Cash, property, or borrowed amounts used in the activity (or contributed to the activity, or used to acquire the activity) that duct on this line fees for tax advice related Line 44 to your farming business and for preparation of the tax forms related to your farming business. Travel, meals, and entertainment. Gener- ally, you can deduct expenses for farm this method. See Pub. 225 for exceptions, inventory methods, how to change methods of accounting, and for rules that require certain costs to be capitalized or included in inventory. Lines 39a Through 41c See the instructions for lines 5a through 7c that begin on page F-2. See the instructions for line 10 on page F-3. F-6
Department of the Treasury Internal Revenue Service 2004 Instructions for Schedule J Income Averaging for Farmers and Fishermen Use Schedule J (Form 1040) to elect to figure your 2004 tax by averaging, over the previous 3 years (base years), all or part of your 2004 taxable income from your trade or business of farming or fishing. Making this election may give you a lower tax if your 2004 income from farming or fishing is high and your taxable income for one or more of the 3 prior years was low. This election does not apply when figuring your tentative minimum tax on Form 6251 (that is, you cannot average your AMT income from farming or fishing). Also, you do not have to recompute, because of this election, the tax liability of any minor child who was required to use your tax rates in the prior years. Your elected farm income is the amount of your taxable income from farming or What’s New fishing that you elect to include on line 2. by someone else, or • Contract harvesting of an agricultural or horticultural commodity grown or raised Fishermen. You can use Schedule J to av- You do not have to include all of your erage your income from your fishing busi- • Merely buying or reselling plants or taxable income from farming or fishing on ness by electing to include taxable income animals grown or raised by someone else. line 2. It may be to your advantage to infrom fishing in elected farm income on clude less than the full amount, depending Fishing business. A fishing business is the line 2. on how the amount you include on line 2 trade or business of fishing in which the affects your tax bracket for the current and Alternative minimum tax (AMT). Filing fish harvested, either in whole or in part, prior 3 tax years. Schedule J may reduce your total tax for are intended to enter commerce or enter 2004 even if you owe AMT. commerce through sale, barter, or trade. Your elected farm income cannot ex- This includes: ceed your taxable income. Also, the portion of your elected farm income treated as a net 1. The catching, taking, or harvesting of capital gain cannot exceed the smaller of fish; General Instructions your total net capital gain or your net capiharvesting of fish; 2. The attempted catching, taking, or Prior Year Tax Returns tal gain attributable to your farming or fish- You may need copies of your original or ing business. If your elected farm income 3. Any other activity which can reasonaamended income tax returns for 2001, includes net capital gain, you must allocate bly be expected to result in the catching, 2002, and 2003 to figure your tax on an equal portion of the net capital gain to taking, or harvesting of fish; or Schedule J. If you do not have copies of each of the base years. If, for any base year, 4. Any operations at sea in support of, or those returns, you can get them by filing you had a capital loss that resulted in a in preparation for, any activity described in Form 4506. There is a $39 fee for each capital loss carryover to the next tax year, (1) through (3) above. return requested. If you want a free trancated to that base year by any part of the do not reduce the elected farm income allo- script of your tax return, use Form 4506–T. carryover. The word fish means finfish, mollusks, See your Form 1040 instruction booklet to crustaceans, and all other forms of marine find out how to get these forms. Keep a animal and plant life other than marine copy of your 2004 income tax return for use Farming business. A farming business is mammals and birds. in 2005, 2006, or 2007. the trade or business of cultivating land or raising or harvesting any agricultural or A fishing business does not include any Additional Information horticultural commodity. This includes: scientific research activity which is con- 1. Operating a nursery or sod farm; ducted by a scientific research vessel. See Regulations section 1.1301-1 for more details. 2. Raising or harvesting of trees bearing fruits, nuts, or other crops; Generally, income, gains, 3. Raising ornamental trees (but not evfarming or fishing are reported TIP losses, and deductions from ergreen trees that are more than 6 years old Specific Instructions when severed from the roots); on: 4. Raising, shearing, feeding, caring for, • Form 1040, line 7, to the extent of training, and managing animals; and wages and other compensation you Line 2 received as a shareholder in an S 5. Leasing land to a tenant engaged in a corporation engaged in a farming Elected Farm Income farming business, but only if the lease pay- or fishing business; To figure elected farm income, first figure ments are (a) based on a share of the • Schedule C or C-EZ; your taxable income from farming or fishtenant’s production (not a fixed amount), and (b) determined under a written agreeing. This includes all income, gains, losses, • Schedule D; ment entered into before the tenant begins • Schedule E, Part II; and deductions attributable to any farming or fishing business. However, it does not significant activities on the land. • Schedule F; include gain from the sale or other disposi- • Form 4797; and tion of land. A farming business does not include: • Form 4835. J-1 Cat. No. 25514J
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Note. This booklet does not contain
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What is IRS e-file? It’s the fast
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Tax Return Page Reference Questions
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Quick and Easy Access to Tax Help a
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Topic TeleTax Topics No. Subject No
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Before You Fill In Form 1040 See Ho
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Chart B—For Children and Other De
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Form Item and Box in Which it Shoul
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Line 2 December 31, 2004, you were
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Form 1040—Lines 7 and 8a less tha
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gross income was over $139,500 ($69
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Form 1040—Lines 16a and 16b Age (
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Form 1040—Lines 20a and 20b Socia
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Form 1040—Line 25 IRA Deduction W
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Form 1040—Lines 27 Through 29 for
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Line 35 Include in the total on lin
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Form 1040—Lines 41 and 43 Tax Tab
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Line 44 • Tax-exempt interest fro
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Line 51—Child Tax Credit What Is
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ured the credit. Check box c and en
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Lines 65a and 65b— Earned Income
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Form 1040—Lines 65a and 65b Conti
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Worksheet A—Earned Income Credit
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Form 1040—Lines 65a and 65b Works
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2004 Earned Income Credit (EIC) Tab
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number is 20202086. Do not include
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You cannot sign your return are not
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site at www.aarp.org/taxaide or cal
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2004 Tax Table—Continued If line
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2004 Instructions for Form 1040 (ALL) - Supreme Law Firm

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