2004 Instructions for Form 1040 (ALL) - Supreme Law Firm
2004 Instructions for Form 1040 (ALL) - Supreme Law Firm
2004 Instructions for Form 1040 (ALL) - Supreme Law Firm
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ing the tax year, and you did not materially extraterritorial income that is qualifying vehicles used in your business and<br />
participate under any of the material par- <strong>for</strong>eign trade income. Use <strong>Form</strong> 8873 to clean-fuel vehicle refueling property. For<br />
ticipation tests (other than this test 4). figure the extraterritorial income exclusion. details, see Pub. 535.<br />
5. You materially participated in the ac- Report it on Schedule C as explained in the<br />
tivity <strong>for</strong> any 5 of the prior 10 tax years. <strong>Instructions</strong> <strong>for</strong> <strong>Form</strong> 8873.<br />
If the business use percentage of any<br />
listed property (defined in the instructions<br />
6. The activity is a personal service ac- <strong>for</strong> line 13 on page C-4) decreased to 50%<br />
tivity in which you materially participated<br />
or less in <strong>2004</strong>, report on this line any re<strong>for</strong><br />
any 3 prior tax years. A personal service Line 1 capture of excess depreciation, including<br />
activity is an activity that involves per<strong>for</strong>m-<br />
Enter gross receipts from your trade or any section 179 expense deduction. Use<br />
ing personal services in the fields of health,<br />
business. Include amounts you received in <strong>Form</strong> 4797 to figure the recapture. Also, if<br />
law, engineering, architecture, accounting,<br />
your trade or business that were properly the business use percentage drops to 50%<br />
actuarial science, per<strong>for</strong>ming arts, consultshown<br />
on <strong>Form</strong>s 1099-MISC. If the total or less on leased listed property (other than<br />
ing, or any other trade or business in which<br />
amounts that were reported in box 7 of a vehicle), include on this line any inclu-<br />
capital is not a material income-producing<br />
<strong>Form</strong>s 1099-MISC are more than the total sion amount. See Pub. 946 to figure the<br />
factor.<br />
you are reporting on line 1, attach a state- amount.<br />
7. Based on all the facts and circum- ment explaining the difference.<br />
stances, you participated in the activity on a<br />
regular, continuous, and substantial basis Statutory employees. If you received a<br />
during the tax year. But you do not meet <strong>Form</strong> W-2 and the “Statutory employee”<br />
box in box 13 of that <strong>for</strong>m was checked,<br />
Part II. Expenses<br />
this test if you participated in the activity<br />
<strong>for</strong> 100 hours or less during the tax year. report your income and expenses related to Capitalizing costs of property. If you pro-<br />
Your participation in managing the activity that income on Schedule C or C-EZ. Enter duced real or tangible personal property or<br />
does not count in determining if you meet your statutory employee income from box acquired property <strong>for</strong> resale, certain exthis<br />
test if any person (except you) (a) re- 1 of <strong>Form</strong> W-2 on line 1 of Schedule C or penses attributable to the property gener-<br />
ceived compensation <strong>for</strong> per<strong>for</strong>ming mansecurity<br />
and Medicare tax should have been capitalized. In addition to direct costs, pro-<br />
C-EZ and check the box on that line. Social ally must be included in inventory costs or<br />
agement services in connection with the<br />
activity or (b) spent more hours during the withheld from your earnings; there<strong>for</strong>e, ducers of inventory property generally<br />
tax year than you spent per<strong>for</strong>ming manthese<br />
earnings. Statutory employees in- costs in their inventory. Purchasers of per-<br />
you do not owe self-employment tax on must also include part of certain indirect<br />
agement services in connection with the<br />
activity (regardless of whether the person clude full-time life insurance agents, cer- sonal property acquired <strong>for</strong> resale must in-<br />
was compensated <strong>for</strong> the services). tain agent or commission drivers and clude part of certain indirect costs in<br />
traveling salespersons, and certain home- inventory only if the average annual gross<br />
Rental of personal property. A rental acmillion.<br />
Also, you must capitalize part of<br />
workers. receipts <strong>for</strong> the 3 prior tax years exceed $10<br />
tivity (such as long-term equipment leas- If you had both self-employment inthe<br />
indirect costs that benefit real or tangiing)<br />
is a passive activity even if you come and statutory employee income, you<br />
materially participated in the activity. must file two Schedules C. You cannot use<br />
ble personal property constructed <strong>for</strong> use in<br />
However, if you met any of the five excep- Schedule C-EZ or combine these amounts<br />
a trade or business, or noninventory proptions<br />
listed under Rental Activities in the on a single Schedule C.<br />
erty produced <strong>for</strong> sale to customers. Re-<br />
<strong>Instructions</strong> <strong>for</strong> <strong>Form</strong> 8582, the rental of the<br />
duce the amounts on lines 8 through 26 and<br />
property is not treated as a rental activity Installment sales. Generally, the install- Part V by amounts capitalized. For details,<br />
and the material participation rules above ment method cannot be used to report in- see Pub. 538.<br />
apply.<br />
come from the sale of (a) personal property<br />
regularly sold under the installment Exception <strong>for</strong> certain producers. Produc-<br />
Exception <strong>for</strong> oil and gas. If you are filing method, or (b) real property held <strong>for</strong> resale ers who account <strong>for</strong> inventoriable items in<br />
Schedule C to report income and deduc- to customers. But the installment method the same manner as materials and supplies<br />
tions from an oil or gas well in which you can be used to report income from sales of that are not incidental can currently deduct<br />
own a working interest directly or through certain residential lots and timeshares if expenditures <strong>for</strong> direct labor and all indi-<br />
an entity that does not limit your liability, you elect to pay interest on the tax due on rect costs that would otherwise be included<br />
check the “Yes” box. The activity of own- that income after the year of sale. See secon<br />
page C-6 <strong>for</strong> more details.<br />
in inventory costs. See Cost of Goods Sold<br />
ing the working interest is not a passive tion 453(l)(2)(B) <strong>for</strong> details. If you make<br />
activity regardless of your participation. this election, include the interest on <strong>Form</strong><br />
<strong>1040</strong>, line 62. Also, enter “453(l)(3)” and Exception <strong>for</strong> creative property. If you are<br />
Limit on losses. If you checked the “No” the amount of the interest on the dotted line an artist, author, or photographer, you may<br />
box and you have a loss from this business, to the left of line 62.<br />
be exempt from the capitalization rules.<br />
you may have to use <strong>Form</strong> 8582 to figure<br />
However, your personal ef<strong>for</strong>ts must have<br />
your allowable loss, if any, to enter on If you use the installment method, at-<br />
created (or reasonably be expected to cretach<br />
a schedule to your return. Show sepa- ate) the property. This exception does not<br />
Schedule C, line 31. Generally, you can<br />
deduct losses from passive activities only rately <strong>for</strong> <strong>2004</strong> and the 3 preceding years: apply to any expense related to printing,<br />
to the extent of income from passive activi- gross sales, cost of goods sold, gross profit, photographic plates, motion picture films,<br />
ties. For details, see Pub. 925.<br />
percentage of gross profit to gross sales, video tapes, or similar items. These examounts<br />
collected, and gross profit on penses are subject to the capitalization<br />
amounts collected. rules. For details, see Pub. 538.<br />
Line H<br />
If you started or acquired this business in<br />
Line 6 Line 9<br />
Report on line 6 amounts from finance reserve<br />
income, scrap sales, bad debts you<br />
recovered, interest (such as on notes and<br />
accounts receivable), state gasoline or fuel<br />
tax refunds you got in <strong>2004</strong>, credit <strong>for</strong> federal<br />
tax paid on gasoline or other fuels<br />
claimed on your 2003 <strong>Form</strong> <strong>1040</strong>, prizes<br />
and awards related to your trade or busi-<br />
<strong>2004</strong>, check the box on line H. Also check<br />
the box if you are reopening or restarting<br />
this business after temporarily closing it,<br />
and you did not file a 2003 Schedule C or<br />
C-EZ <strong>for</strong> this business.<br />
You can deduct the actual expenses of run-<br />
ning your car or truck or take the standard<br />
mileage rate. You must use actual expenses<br />
if you used your vehicle <strong>for</strong> hire (such as a<br />
taxicab) or you used more than four vehi-<br />
cles simultaneously in your business (such<br />
as in fleet operations). You cannot use ac-<br />
tual expenses <strong>for</strong> a leased vehicle if you<br />
Part I. Income ness, and other kinds of miscellaneous previously used the standard mileage rate<br />
Except as otherwise provided in the Inter- business income. Include amounts you re- <strong>for</strong> that vehicle.<br />
nal Revenue Code, gross income includes ceived in your trade or business as shown<br />
income from whatever source derived. on <strong>Form</strong> 1099-PATR. Also, include any You can take the standard mileage rate<br />
Gross income, however, does not include recapture of the deduction <strong>for</strong> clean-fuel <strong>for</strong> <strong>2004</strong> only if you:<br />
C-3