Outline_4_Student_Sch_C-Investment_and_Employee_expenses -...

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OUTLINE 4 Schedule C Business Expenses, Investment Expenses, and Employee Expenses March 7, 2011 OUTLINE 4 Sole Propietorships vs. Employees: Schedule C NOLO Chapter 1, Chapter 2, Chapter 4, Chapter 11 Chapter 6 Pages 1 to 8 (Section 6.1 Classification of deductible expenses) Chapter 6 Pages 11-20 through example 23) Chapter 6 Pages 25-34 (skip unpaid expenses and interest and relationships and constructive ownership page 28-29) Chapter 4 pages 16 bottom (dividends) to 4-19 (bottom—income from partnerships, etc). Chapter 9 Pages 1 to 5 (Sections 9.1 and 9.2 Employee vs. Self-Employed) Chapter 9 Pages 32-33 (Section 9.12) Self-employed individuals Job-related expenses and misc. deductions (Schedule A, subject to 2% of AGI limit) Chapter 9: pages 25-26 (Section 9.8) Miscellaneous Employee Expenses, Section 9.10, 9.11, 9.12 and 9.13 (pages 25-33 top); Chapter 10: Pages 10-27 to 10-31 (Section 10.6, 10.7, 10.8, 10.9--Other Miscellaneous Deductions and Comprehensive Example of Schedule A) PROBLEMS: Chapter 6: Problems, 4, 5, 6, 7, 11, 18, 19, 20, 21, 24, 29, 33, 34, 35, 37, 41, 48, 49, 54, 57, Chapter 9 Problems: 1, 2, 3, 4, 5, I. HOW BUSINESSES ARE TAXED a. Nolo Chapter 1, Nolo Chapter 11 pages 310-311. 1) Sole Proprietorship a. A sole proprietorship is not an entity separate from its owner. a.i. Proprietor owns all the assets personally. b. Pass through entity. c. Operating income and loss are reported on Sch. C. c.i. Other items not related to operations are reported on other schedules: c.i.1. Interest and dividend income (Sch. B) and investment income (other income) c.i.2. Capital gains and losses (Sch. D), c.i.3. Charitable contributions (Sch. A) c.i.4. Personal expenses (e.g. medical expenses)—Sch. A c.i.5. Investment expenses—Schedule A c.i.6. State income taxes (Sch. A). 1
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d. Spouses who co-own a business d.i. Common Law States d.i.1. Treated as a partnership d.i.1.a. File partnership tax return d.i.2. Or may elect “qualified joint venture” and are treated as sole proprietors d.i.2.a.i. Both spouses must materially participate d.i.2.a.i.1. More than 500 hours per year d.i.2.a.i.2. Or 100 hours if no one else works more d.i.2.a.ii. Each spouse files a separate Schedule C and Schedule SE to report his or her share of the income. d.i.2.a.ii.1. Each pays self-employment tax. d.ii. In community property states (Ca.) spouses can: d.ii.1. File a partnership return d.ii.2. Or elect “qualified joint venture” d.ii.3. Or file one Sch. C for both of them d.ii.3.a. ONLY one spouse pays self-employment tax and receives credit for Social Security and Medicare. d.ii.3.b. No material participation requirement Income From Partnerships QUESTION 4-14: Tom and Bert are partners. Each has a 50 percent interest in the partnership profits. In 2010, the partnership generated $300,000 in taxable income, but Tom could not withdraw any of the funds for this year because the partnership did not have any excess cash to distribute. In 2011, the partnership had $800,000 of taxable income, and Tom was able to
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This note was uploaded on 11/07/2011 for the course ACCT 508 taught by Professor Frankel during the Spring '10 term at S.F. State.

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Outline_4_Student_Sch_C-Investment_and_Employee_expenses -...

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