Use Schedule C to report income or loss from a business you operated or a
Instructions for profession you practiced as a sole proprietor. Also, use Schedule C to report wages
and expenses you had as a statutory employee. An activity qualifies as a business
Schedule C, if your primary purpose for engaging in the activity is for income or profit and you
are involved in the activity with continuity and regularity. For example, a sporadic
Profit or Loss activity or a hobby does not qualify as a business. To report income from a non-
business activity, see the Instructions for Form 1040, line 21.
From Business Small businesses and statutory employees with expenses of $2,500 or less may
be able to file Schedule C-EZ instead of Schedule C. See Schedule C-EZ to find
out if you qualify to file it.
This activity may subject you to state and local taxes and other requirements
such as business licenses and fees. Check with your state and local governments
for more information.
If you received cash of more than $10,000 method or the accrual method. However, if
in one or more related transactions in your inventories are required, you must use the
General Instructions trade or business, you may have to file Form
8300. For details, see Pub. 1544.
accrual method for sales and purchases.
Special rules apply to long-term contracts.
Other Schedules and Forms See Internal Revenue Code section 460 for
You May Have To File Additional Information details. The method used must clearly reflect
See Pub. 334 for more information for small your income.
Schedule A to deduct interest, taxes, and If you use the cash method, show all
casualty losses not related to your business. businesses.
items of taxable income actually or construc-
Schedule E to report rental real estate and tively received during the year (in cash, prop-
royalty income or (loss) that is not subject to
self-employment tax. Specific Instructions erty, or services). Income is constructively
received when it is credited to your account
Schedule F to report profit or (loss) from or set aside for you to use. Also, show
farming. Filers of Form 1041 amounts actually paid during the year for
Schedule SE to pay self-employment tax on deductible expenses.
Do not complete the block labeled “Social
income from any trade or business. security number.” Instead, enter your em- If you use the accrual method, report
Form 4562 to claim depreciation on assets ployer identification number (EIN) on line D. income when you earn it and deduct ex-
placed in service in 1997, to claim amortiza- penses when you incur them even if you do
tion that began in 1997, or to report infor- not pay them during the tax year.
mation on listed property. Line A Accrual-basis taxpayers are put on a cash
Form 4684 to report a casualty or theft gain Describe the business or professional activ- basis for deducting business expenses owed
or loss involving property used in your trade ity that provided your principal source of to a related cash-basis taxpayer. Other rules
or business or income-producing property. income reported on line 1. If you owned more determine the timing of deductions based on
than one business, you must complete a economic performance. See Pub. 538.
Form 4797 to report sales, exchanges, and
involuntary conversions (not from a casualty separate Schedule C for each business. Give To change your accounting method (in-
or theft) of trade or business property. the general field or activity and the type of cluding treatment of inventories), you must
product or service. If your general field or usually get permission from the IRS. In gen-
Form 8271 if you are claiming or you are eral, file Form 3115 within the first 180 days
reporting on Schedule C or C-EZ any activity is wholesale or retail trade, or serv-
ices connected with production services of the tax year in which you want to make
income, deduction, loss, credit, or other tax the change.
benefit from a tax shelter. (mining, construction, or manufacturing),
also give the type of customer or client. For
Form 8594 to report certain purchases or example, “wholesale sale of hardware to re-
sales of groups of assets that constitute a tailers” or “appraisal of real estate for lending Line G
trade or business. institutions.” Participation, for purposes of the following
Form 8824 to report like-kind exchanges. seven material participation tests, generally
Form 8829 to claim expenses for business includes any work you did in connection with
use of your home. Line D an activity if you owned an interest in the
You need an employer identification number activity at the time you did the work. The
Heavy Vehicle Use Tax (EIN) only if you had a Keogh plan or were capacity in which you did the work does not
required to file an employment, excise, matter. However, work is not treated as par-
If you use certain highway trucks, truck- ticipation if it is work that an owner would
trailers, tractor-trailers, or buses in your trade estate, trust, or alcohol, tobacco, and fire-
arms tax return. If you need an EIN, file Form not customarily do in the same type of ac-
or business, you may have to pay a Federal tivity and one of your main reasons for doing
highway motor vehicle use tax. See Form SS-4. If you do not have an EIN, leave line
D blank. Do not enter your SSN. the work was to avoid the disallowance of
2290 to find out if you owe this tax. losses or credits from the activity under the
passive activity rules.
Information Returns Line E Work you did as an investor in an activity
You may have to file information returns for Enter your business address. Show a street is not treated as participation unless you
wages paid to employees, certain payments address instead of a box number. Include were directly involved in the day-to-day
of fees and other nonemployee compensa- the suite or room number, if any. If you con- management or operations of the activity.
tion, interest, rents, royalties, real estate ducted the business from your home located Work done as an investor includes:
transactions, annuities, and pensions. You at the address shown on Form 1040, page 1. Studying and reviewing financial state-
may also have to file an information return if 1, you do not have to complete this line. ments or reports on operations of the activ-
you sold $5,000 or more of consumer pro- ity.
ducts to a person on a buy-sell, deposit-
commission, or other similar basis for resale. Line F 2. Preparing or compiling summaries or
For more information, see the Instructions analyses of the finances or operations of the
You must use the cash method on your activity for your own use.
for Forms 1099, 1098, 5498, and W-2G. return unless you kept account books. If you
kept such books, you can use the cash
C-1
Cat. No. 243329W
3. Monitoring the finances or operations of passive activity losses, see the instructions amount of the interest on the dotted line to
the activity in a nonmanagerial capacity. for Form 8582. the left of line 53.
Participation by your spouse during the Exception for Oil and Gas. If you are filing If you use the installment method, attach
tax year in an activity you own can be count- Schedule C to report income and deductions a schedule to your return. Show separately
ed as your participation in the activity. This from an oil or gas well in which you own a for 1997 and the 3 preceding years: gross
applies even if your spouse did not own an working interest directly or through an entity sales, cost of goods sold, gross profit, per-
interest in the activity and whether or not you that does not limit your liability, check the centage of gross profit to gross sales,
and your spouse file a joint return for the tax “Yes” box. The activity of owning the work- amounts collected, and gross profit on
year. ing interest is not a passive activity regard- amounts collected.
Material Participation. For purposes of the less of your participation in the activity.
passive activity rules, you materially partici- Limit on Losses. If you checked the “No” Line 2
pated in the operation of this trade or busi- box and you have a loss from this business,
ness activity during 1997 if you meet any of you may have to use Form 8582 to figure Enter such items as returned sales, rebates,
the following seven tests: your allowable loss, if any, to enter on and allowances from the sales price.
1. You participated in the activity for more Schedule C, line 31. Generally, you can
deduct losses from passive activities only to
than 500 hours during the tax year.
the extent of income from passive activities. Line 6
2. Your participation in the activity for the
tax year was substantially all of the partici- For more details, see Pub. 925. Report on line 6 amounts from finance re-
pation in the activity of all individuals (includ- serve income, scrap sales, bad debts you
ing individuals who did not own any interest recovered, interest (such as on notes and
in the activity) for the tax year.
Line H accounts receivable), state gasoline or fuel
If you started or acquired this business in tax refunds you got in 1997, credit for Fed-
3. You participated in the activity for more eral tax paid on gasoline or other fuels
than 100 hours during the tax year, and you 1997, check the box on line H. Also, check
the box if you are reopening or restarting this claimed on your 1996 Form 1040, prizes and
participated at least as much as any other awards related to your trade or business, and
person for the tax year. This includes indi- business after temporarily closing it, and you
did not file a 1996 Schedule C or C-EZ for other kinds of miscellaneous business
viduals who did not own any interest in the income. Include amounts you received in
activity. this business.
your trade or business as shown on Form
4. The activity is a significant participation 1099-PATR. Also, include any recapture of
activity for the tax year, and you participated
in all significant participation activities for Part I. Income the deduction for clean-fuel vehicles used in
your business and clean-fuel vehicle refuel-
more than 500 hours during the year. An ing property. For more details, see Pub. 535.
activity is a “significant participation activity” Line 1 If the business use percentage of any
if it involves the conduct of a trade or busi- listed property (defined in the instructions for
ness, you participated in the activity for more Enter gross receipts from your trade or busi- line 13) decreased to 50% or less in 1997,
than 100 hours during the tax year, and you ness. Include amounts you received in your report on this line any recapture of excess
did not materially participate under any of trade or business that were properly shown depreciation, including any section 179 ex-
the material participation tests (other than on Forms 1099-MISC. If the total amounts pense deduction. Use Form 4797 to figure
this test 4). that were reported in box 7 of Forms the recapture. Also, if the business use per-
5. You materially participated in the activ- 1099-MISC are more than the total you are centage drops to 50% or less on leased
ity for any 5 of the prior 10 tax years. reporting on line 1, attach a statement ex- listed property (other than a vehicle), include
plaining the difference. on this line any inclusion amount. See Pub.
6. The activity is a personal service activity
in which you materially participated for any Statutory Employees. If you received a 946 to figure the amount.
3 prior tax years. A personal service activity Form W-2 and the “Statutory employee” box
is an activity that involves performing per- in box 15 of that form was checked, report
sonal services in the fields of health, law,
engineering, architecture, accounting, actu-
your income and expenses related to that
income on Schedule C or C-EZ. Enter your Part II. Expenses
arial science, performing arts, consulting, or statutory employee income from box 1 of Capitalizing Costs of Property. If you pro-
any other trade or business in which capital Form W-2 on line 1 of Schedule C or C-EZ, duced real or tangible personal property or
is not a material income-producing factor. and check the box on that line. Social se- acquired property for resale, certain ex-
curity and Medicare tax should have been penses attributable to the property must be
7. Based on all the facts and circum- withheld from your earnings; therefore, you included in inventory costs or capitalized. In
stances, you participated in the activity on a do not owe self-employment tax on these addition to direct costs, producers of inven-
regular, continuous, and substantial basis earnings. tory property must also include part of cer-
during the tax year. But you do not meet this tain indirect costs in their inventory.
test if you participated in the activity for 100 Statutory employees include full-time life
insurance agents, certain agent or commis- Purchasers of personal property acquired for
hours or less during the tax year. Your par- resale must include part of certain indirect
ticipation in managing the activity does not sion drivers and traveling salespersons, and
certain homeworkers. costs in inventory only if the average annual
count in determining if you meet this test if gross receipts for the 3 prior tax years
any person (except you) — If you had both self-employment income
and statutory employee income, do not exceed $10 million. Also, you must capitalize
a. Received compensation for performing part of the indirect costs that benefit real or
management services in connection with the combine these amounts on a single Sched-
ule C or C-EZ. In this case, you must file two tangible personal property constructed for
activity, or use in a trade or business, or noninventory
Schedules C. You cannot use Schedule
b. Spent more hours during the tax year C-EZ. property produced for sale to customers.
than you spent performing management Reduce the amounts on lines 8–26 and Part
services in connection with the activity (re- Installment Sales. Generally, the installment V by amounts capitalized. For more details,
gardless of whether the person was com- method may not be used to report income see Pub. 538.
pensated for the services). from the sale of (a) personal property regu-
larly sold under the installment method or (b) Exception for Creative Property. If you are
If you meet any of the above tests, check real property held for resale to customers. an artist, author, or photographer, you may
the “Yes” box. But the installment method may be used to be exempt from the capitalization rules.
If you do not meet any of the above tests, report income from sales of certain residen- However, your personal efforts must have
check the “No” box. This business is a pas- tial lots and timeshares if you elect to pay created (or reasonably be expected to
sive activity. If you have a loss from this interest on the tax due on that income after create) the property. This exception does not
business, see Limit on Losses below. If you the year of sale. See Internal Revenue Code apply to any expense related to printing,
have a profit from this business activity but section 453(l)(2)(B) for details. If you make photographic plates, motion picture films,
have current year losses from other passive this election, include the interest on Form video tapes, or similar items. These ex-
activities or you have prior year unallowed 1040, line 53. Also, write “453(l)(3)” and the penses are subject to the capitalization rules.
For more details, see Pub. 538.
C-2
the amount of depreciation to enter on line
Line 9 13. For property placed in service before
1981, figure depreciation from your own
Line 15
Include debts and partial debts from sales books and records. Deduct premiums paid for business insur-
or services that were included in income and You may also choose under Internal Rev- ance on line 15. Deduct on line 14 amounts
are definitely known to be worthless. If you enue Code section 179 to expense part of paid for employee accident and health insur-
later collect a debt that you deducted as a the cost of certain property you bought in ance. Do not deduct amounts credited to a
bad debt, include it as income in the year 1997 for use in your business. See the In- reserve for self-insurance or premiums paid
collected. For more details, see Pub. 535. structions for Form 4562 for more details. for a policy that pays for your lost earnings
due to sickness or disability. For more de-
When To Attach Form 4562. You must tails, see Pub. 535.
Line 10 complete and attach Form 4562 only if:
You can deduct the actual expenses of run- ● You are claiming depreciation on prop-
ning your car or truck, or take the standard erty placed in service during 1997, or Lines 16a and 16b
mileage rate. You must use actual ex- ● You are claiming depreciation on listed Interest Allocation Rules. The tax treatment
penses if you did not own the vehicle or if property (defined below), regardless of the of interest expense differs depending on its
you used more than one vehicle simulta- date it was placed in service, or type. For example, home mortgage interest
neously in your business (such as in fleet ● You are claiming a section 179 expense and investment interest are treated different-
operations). deduction. ly. “Interest allocation” rules require you to
If you deduct actual expenses, include on If you acquired depreciable property for allocate (classify) your interest expense so it
line 10 the business portion of expenses for the first time in 1997, see Pub. 946. is deducted (or capitalized) on the correct
gasoline, oil, repairs, insurance, tires, license line of your return and gets the right tax treat-
Listed property generally includes, but is ment. These rules could affect how much
plates, etc. Show depreciation on line 13 and not limited to:
rent or lease payments on line 20a. interest you are allowed to deduct on Sched-
● Passenger automobiles weighing 6,000 ule C or C-EZ.
If you choose to take the standard mileage pounds or less.
rate, you cannot deduct depreciation or your Generally, you allocate interest expense
actual operating expenses. To take the stan- ● Any other property used for transporta- by tracing how the proceeds of the loan were
dard mileage rate, multiply the number of tion if the nature of the property lends itself used. See Pub. 535 for details.
business miles by 31.5 cents a mile. Add to to personal use, such as motorcycles, If you paid interest in 1997 that applies to
this amount your parking fees and tolls, and pickup trucks, etc. future years, deduct only the part that ap-
enter the total. ● Any property used for entertainment or plies to 1997. If you paid interest on a debt
For more details, see Pub. 463. recreational purposes (such as photograph- secured by your main home and any of the
ic, phonographic, communication, and video proceeds from that debt were used in con-
Information on Your Vehicle. If you claim recording equipment).
any car and truck expenses, you must pro- nection with your trade or business, see Pub.
vide certain information on the use of your ● Cellular telephones or other similar tel- 535 to figure the amount that is deductible
vehicle by completing: ecommunications equipment. on Schedule C or C-EZ.
● Part IV of Schedule C or Part III of ● Computers or peripheral equipment. If you have a mortgage on real property
Schedule C-EZ if (a) you are claiming the Exceptions. Listed property does not in- used in your business (other than your main
standard mileage rate, you lease your vehi- clude photographic, phonographic, commu- home), enter on line 16a the interest you paid
cle, or your vehicle is fully depreciated and nication, or video equipment used for 1997 to banks or other financial institu-
(b) you are not required to file Form 4562 exclusively in your trade or business or at tions for which you received a Form 1098.
for any other reason. If you used more than your regular business establishment. It also If you did not receive a Form 1098, enter the
one vehicle during the year, attach your own does not include any computer or peripheral interest on line 16b.
schedule with the information requested in equipment used exclusively at a regular If you paid more mortgage interest than is
Part IV of Schedule C, or Part III of Schedule business establishment and owned or shown on Form 1098 or similar statement,
C-EZ, for each additional vehicle. leased by the person operating the estab- see Pub. 535 to find out if you can deduct
● Part V of Form 4562 if you are claiming lishment. For purposes of these exceptions, the additional interest. If you can, enter the
depreciation on your vehicle or you are re- a portion of your home is treated as a regular amount on line 16a. Attach a statement to
quired to file Form 4562 for any other reason business establishment only if that portion your return explaining the difference. Write
(see the instructions for line 13 below). meets the requirements under Internal Rev- “See attached” in the left margin next to line
enue Code section 280A(c)(1) for deducting 16a.
expenses for the business use of your home. If you and at least one other person (other
Line 12 If the business use percentage of any than your spouse if you file a joint return)
Enter your deduction for depletion on this listed property decreased to 50% or less in were liable for and paid interest on the mort-
line. If you have timber depletion, attach 1997, see the instructions for line 6 on page gage and the other person received the Form
Form T. See Pub. 535 for details. C-2. 1098, report your share of the interest on line
16b. Attach a statement to your return show-
ing the name and address of the person who
Line 13 Line 14 received the Form 1098. In the left margin
Depreciation and Section 179 Expense Deduct contributions to employee benefit next to line 16b, write “See attached.”
Deduction. Depreciation is the annual de- programs that are not an incidental part of a Do not deduct interest you paid or accrued
duction allowed to recover the cost or other pension or profit-sharing plan included on on debts allocable to investment property.
basis of business or investment property line 19. Examples are accident and health This interest is generally deducted on
with a useful life of more than 1 year. You plans, group-term life insurance, and depen- Schedule A (Form 1040). For details, see
can also depreciate improvements made to dent care assistance programs. Pub. 550.
leased business property. However, stock in Do not include on line 14 any contributions
trade, inventories, and land are not depreci- you made on your behalf as a self-employed
able. person to an accident and health plan or for
Line 17
Depreciation starts when you first use the group-term life insurance. You may be able Include on this line fees for tax advice related
property in your business or for the produc- to deduct on Form 1040, line 27, part of the to your business and for preparation of the
tion of income. It ends when you take the amount you paid for health insurance on tax forms related to your business.
property out of service, deduct all your de- behalf of yourself, your spouse, and depen-
dents, even if you do not itemize your de-
preciable cost or other basis, or no longer
use the property in your business or for the ductions. See the Form 1040 instructions on Line 19
production of income. page 17 for more details. Enter your deduction for contributions to a
For property placed in service after 1980, pension, profit-sharing, or annuity plan, or
see the Instructions for Form 4562 to figure plans for the benefit of your employees. If
the plan includes you as a self-employed
C-3
person, enter contributions made as an em- amount of the current year credit shown on hunting lodge) used for any activity usually
ployer on your behalf on Form 1040, line 28, line 4 of Form 8846. considered entertainment, amusement, or
not on Schedule C. ● Federal highway use tax. recreation.
Generally, you must file one of the follow- Do not deduct on this line: Also, you cannot deduct amounts paid or
ing forms if you maintain a pension, profit- ● Federal income taxes, including your incurred for membership dues in any club
sharing, or other funded-deferred self-employment tax. However, you may organized for business, pleasure, recreation,
compensation plan. The filing requirement is deduct one-half of your self-employment tax or other social purpose. This includes coun-
not affected by whether or not the plan qual- on Form 1040, line 26. try clubs, golf and athletic clubs, airline and
ified under the Internal Revenue Code, or hotel clubs, and clubs operated to provide
whether or not you claim a deduction for the ● Estate and gift taxes. meals under conditions favorable to busi-
current tax year. ● Taxes assessed to pay for improve- ness discussion. But it does not include civic
Form 5500. Complete this form for each ments, such as paving and sewers. or public service organizations, professional
plan with 100 or more participants. ● Taxes on your home or personal use organizations (such as bar and medical as-
Form 5500-C/R or 5500-EZ. Complete property. sociations), business leagues, trade associ-
the applicable form for each plan with fewer ● State and local sales taxes on property ations, chambers of commerce, boards of
than 100 participants. purchased for use in your business. Instead, trade, and real estate boards, unless a prin-
treat these taxes as part of the cost of the cipal purpose of the organization is to enter-
There is a penalty for failure to timely file tain, or provide entertainment facilities for,
these forms. property.
members or their guests.
For more information, see Pub. 560. ● State and local sales taxes imposed on
the buyer that you were required to collect There are exceptions to these rules as well
and pay over to the state or local govern- as other rules that apply to sky-box rentals
Lines 20a and 20b ments. These taxes are not included in gross and tickets to entertainment events. See
Pub. 463.
If you rented or leased vehicles, machinery, receipts or sales nor are they a deductible
expense. However, if the state or local gov- Generally, you may deduct only 50% of
or equipment, enter on line 20a the business your business meal and entertainment ex-
portion of your rental cost. But if you leased ernment allowed you to retain any part of the
sales tax you collected, you must include penses, including meals incurred while trav-
a vehicle for a term of 30 days or more, you eling away from home on business.
may have to reduce your deduction by an that amount as income on line 6.
● Other taxes not related to your busi- However, you may fully deduct meals and
amount called the inclusion amount. entertainment furnished or reimbursed to an
ness.
You may have to do this if— employee if you properly treat the expense
as wages subject to withholding. You may
And the vehicle’s fair
market value
Line 24a also fully deduct meals and entertainment
Enter your expenses for lodging and trans- provided to a nonemployee to the extent the
The lease on the first day of the expenses are includible in the gross income
term began: lease exceeded: portation connected with overnight travel for
business while away from your tax home. of that person and reported on Form
During 1997 $15,800 Generally, your tax home is your main place 1099-MISC.
During 1995 or 1996 15,500 of business regardless of where you maintain Figure how much of the amount on line
your family home. You cannot deduct ex- 24b is subject to the 50% limit. Then, enter
During 1994 14,600 one-half of that amount on line 24c.
penses paid or incurred in connection with
During 1993 14,300 employment away from home if that period
During 1992 13,700 of employment exceeds 1 year. Also, you Line 25
cannot deduct travel expenses for your
If the lease term began before 1992, see spouse, your dependent, or any other indi- Deduct only utility expenses paid or incurred
Pub. 463 to find out if you have an inclusion vidual unless that person is your employee, for your trade or business.
amount. the travel is for a bona fide business pur- Local Telephone Service. If you used your
Also see Pub. 463 to figure your inclusion pose, and the expenses would otherwise be home phone for business, do not deduct the
amount. deductible by that person. base rate (including taxes) of the first phone
Enter on line 20b amounts paid to rent or Do not include expenses for meals and line into your residence. But you can deduct
lease other property, such as office space in entertainment on this line. Instead, see the expenses for any additional costs you in-
a building. instructions for lines 24b and 24c below. curred for business that are more than the
You cannot deduct expenses for attend- cost of the base rate for the first phone line.
ing a foreign convention unless it is directly For example, if you had a second line, you
Line 21 related to your trade or business and it is as can deduct the business percentage of the
Deduct the cost of repairs and maintenance. reasonable for the meeting to be held out- charges for that line, including the base rate
Include labor, supplies, and other items that side the North American area as within it. charges.
do not add to the value or increase the life These rules apply to both employers and em-
of the property. Do not deduct the value of ployees. Other rules apply to luxury water
travel.
Line 26
your own labor. Do not deduct amounts
spent to restore or replace property; they For more details, see Pub. 463. Enter the total salaries and wages paid or
must be capitalized. incurred for the tax year. Do not include sal-
aries and wages deducted elsewhere on
Lines 24b and 24c your return or amounts paid to yourself.
Line 23 On line 24b, enter your total business meal
Reduce your deduction by the current year
You can deduct the following taxes on this credits claimed on:
and entertainment expenses. Include meals
line: while traveling away from home for business. ● Form 5884, Work Opportunity Credit.
● State and local sales taxes imposed on Instead of the actual cost of your meals while ● Form 8844, Empowerment Zone Em-
you as the seller of goods or services. If you traveling away from home, you may use the ployment Credit.
collected this tax from the buyer, you must standard meal allowance. For more details, ● Form 8845, Indian Employment Credit.
also include the amount collected in gross see Pub. 463. Caution: If you provided taxable fringe ben-
receipts or sales on line 1. Business meal expenses are deductible efits to your employees, such as personal use
● Real estate and personal property taxes only if they are (a) directly related to or as- of a car, do not deduct as wages the amount
on business assets. sociated with the active conduct of your applicable to depreciation and other ex-
● Social security and Medicare taxes paid trade or business, (b) not lavish or extrava- penses claimed elsewhere.
to match required withholding from your em- gant, and (c) incurred while you or your em-
ployees’ wages. Also, Federal unemploy- ployee is present at the meal.
ment tax paid. Reduce your deduction by the You cannot deduct any expense paid or
incurred for a facility (such as a yacht or
C-4
If all amounts are at risk in this business, ● Amounts paid to acquire, protect,
Line 30 check box 32a and enter your loss on line
31. But if you answered “No” to Question G,
expand, register, or defend trademarks or
trade names.
Business Use of Your Home. You may be you may need to complete Form 8582 to ● Goodwill and certain other intangibles.
able to deduct certain expenses for business figure your allowable loss to enter on line 31.
use of your home, subject to limitations. In general, you may not amortize real
See the Instructions for Form 8582 for more property construction period interest and
Generally, any amount not allowed as a de- details.
duction for 1997 because of the limitations taxes. Special rules apply for allocating in-
If you checked box 32b, get Form 6198 terest to real or personal property produced
can be carried over to 1998. You must attach to determine the amount of your deductible
Form 8829 if you claim this deduction. in your trade or business.
loss and enter that amount on line 31. But if At-Risk Loss Deduction. Any loss from this
For details, see the Instructions for Form you answered “No” to Question G, your loss
8829 and Pub. 587. activity that was not allowed as a deduction
may be further limited. See the Instructions last year because of the at-risk rules is treat-
for Form 8582. If your at-risk amount is zero ed as a deduction allocable to this activity
or less, enter zero on line 31. Be sure to
Line 31 attach Form 6198 to your return. If you
in 1997.
If you have a loss, the amount of loss you checked box 32b and you do not attach Capital Construction Fund. Do not claim
can deduct this year may be limited. Go on Form 6198, the processing of your tax return on Schedule C or C-EZ the deduction for
to line 32 before entering your loss on line may be delayed. amounts contributed to a capital construc-
31. If you answered “No” to Question G on tion fund set up under the Merchant Marine
Statutory Employees. Include your deduct- Act of 1936. To take the deduction, reduce
Schedule C, also see the Instructions for ible loss with other Schedule C amounts on
Form 8582. Enter the net profit or deductible the amount that would otherwise be entered
Form 1040, line 12. Do not include this as taxable income on Form 1040, line 38, by
loss here. Combine this amount with any amount on Schedule SE, line 2.
profit or loss from other businesses, and the amount of the deduction. In the margin
Any loss from this business not allowed to the left of line 38, write “CCF” and the
enter the total on Form 1040, line 12, and
for 1997 because of the at-risk rules is treat- amount of the deduction. For more informa-
Schedule SE, line 2. Estates and trusts
ed as a deduction allocable to the business tion, see Pub. 595.
should enter the total on Form 1041, line 3.
in 1998. For more details, see the Instruc- Deduction for Clean-Fuel Vehicles and
If you have a net profit on line 31, this tions for Form 6198 and Pub. 925.
amount is earned income and may qualify Clean-Fuel Vehicle Refueling Property.
you for the earned income credit. See the You may deduct part of the cost of qualified
clean-fuel vehicle property used in your busi-
Instructions for Form 1040, lines 56a and
56b, on page 21 for more details. Part III. Cost of ness and qualified clean-fuel vehicle refuel-
ing property. See Pub. 535 for more details.
Statutory Employees. If you are filing
Schedule C to report income and expenses
Goods Sold Disabled Access Credit and the Deduction
as a statutory employee, include your net If you engaged in a trade or business in for Removing Barriers to Individuals With
profit or deductible loss from line 31 with which the production, purchase, or sale of Disabilities and the Elderly. You may be
other Schedule C amounts on Form 1040, merchandise was an income-producing able to claim a tax credit of up to $5,000 for
line 12. However, do not report this amount factor, merchandise inventories must be eligible expenditures paid or incurred in 1997
on Schedule SE, line 2. If you are required taken into account at the beginning and end to provide access to your business for indi-
to file Schedule SE because of other self- of your tax year. viduals with disabilities. See Form 8826 for
employment income, see the Instructions for Note: Certain direct and indirect expenses more details. You can also deduct up to
Schedule SE. must be capitalized or included in inventory. $15,000 of costs paid or incurred in 1997 to
See the instructions for Part II. remove architectural or transportation barri-
ers to individuals with disabilities and the
Line 32 elderly. However, you cannot take both the
At-Risk Rules. Generally, if you have (a) a Line 33 credit and the deduction on the same ex-
business loss and (b) amounts in the busi- Your inventories can be valued at cost; cost penditures.
ness for which you are not at risk, you will or market value, whichever is lower; or any
have to complete Form 6198 to figure your other method approved by the IRS.
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
Part V. Other
could actually lose in the business. Expenses
Check box 32b if you have amounts for Include all ordinary and necessary business
which you are not at risk in this business, expenses not deducted elsewhere on
such as the following. Schedule C. List the type and amount of
● Nonrecourse loans used to finance the each expense separately in the space pro-
business, to acquire property used in the vided. Enter the total on lines 48 and 27. Do
business, or to acquire the business that are not include the cost of business equipment
not secured by your own property (other than or furniture, replacements or permanent im-
property used in the business). However, provements to property, or personal, living,
there is an exception for certain nonrecourse and family expenses. Do not include chari-
financing borrowed by you in connection table contributions. Also, you may not
with holding real property. deduct fines or penalties paid to a govern-
● Cash, property, or borrowed amounts ment for violating any law. For more details
used in the business (or contributed to the on business expenses, see Pub. 535.
business, or used to acquire the business) Amortization. Include amortization in this
that are protected against loss by a guaran- part. For amortization that begins in 1997,
tee, stop-loss agreement, or other similar ar- you must complete and attach Form 4562.
rangement (excluding casualty insurance You may amortize:
and insurance against tort liability).
● The cost of pollution-control facilities.
● Amounts borrowed for use in the busi-
ness from a person who has an interest in ● Amounts paid for research and experi-
the business, other than as a creditor, or who mentation.
is related under Internal Revenue Code sec- ● Certain business startup costs.
tion 465(b)(3) to a person (other than you) ● Qualified forestation and reforestation
having such an interest. costs.
C-5
Principal Business or Professional Activity Codes
Locate the major category that best receipts. Enter this 4-digit code on line B Note: If your principal source of income is
describes your activity. Within the major of Schedule C or C-EZ. For example, real from farming activities, you should file
category, select the activity code that most estate agent is under the major category of Schedule F (Form 1040), Profit or Loss
closely identifies the business or profession “Real Estate,” and the code is “5520.” From Farming.
that is the principal source of your sales or
Agricultural Services, Real Estate Hotels & Other Lodging Places 3081 Eating places, fast food
5538 Operators & lessors of 7237 Camps & camping parks 3079 Full service restaurants
Forestry, Fishing 7096 Hotels, motels, & tourist 3210 Grocery stores (general line)
Code buildings, including
residential homes 3251 Liquor stores
1990 Animal services, other than 5553 Operators & lessors of other 7211 Rooming & boarding houses 3236 Specialized food stores (meat,
breeding real property produce, candy, health food,
Laundry & Cleaning Services etc.)
1933 Crop services 5520 Real estate agents & brokers
2113 Farm labor & management 7450 Carpet & upholstery cleaning
5579 Real estate property managers 7419 Coin-operated laundries & dry Furniture & General Merchandise
services 5710 Subdividers & developers,
2246 Fishing, commercial cleaning 3988 Computer & software stores
except cemeteries 7435 Full-service laundry, dry 3970 Furniture stores
2238 Forestry, except logging 6155 Title abstract offices
2212 Horticulture, gardening, & cleaning, & garment service 4317 Home furnishings stores
landscaping 7476 Janitorial & related services (china, floor coverings,
Services: Personal, (building, house, & window drapes)
2469 Hunting & trapping
1974 Livestock breeding Professional, & Business cleaning) 4119 Household appliance stores
Services Medical & Health Services 4333 Music & record stores
0836 Logging
3996 TV, audio & electronic stores
1958 Veterinary services, including Amusement & Recreational 9274 Chiropractors
pets Services 3715 Variety stores
9233 Dentist’s office or clinic 3731 Other general merchandise
9670 Bowling centers 9217 Doctor’s (M.D.) office or clinic stores
Construction 9688 Motion picture & tape 9456 Medical & dental laboratories
0018 Operative builders (for own distribution & allied services 9472 Nursing & personal care Miscellaneous Retail Stores
account) 9597 Motion picture & video facilities 4812 Boat dealers
Building Trades, Including Repairs production 9290 Optometrists 5017 Book stores, excluding
9639 Motion picture theaters 9258 Osteopathic physicians & newsstands
0414 Carpentering & flooring 8557 Physical fitness facilities surgeons 4853 Camera & photo supply stores
0455 Concrete work 9696 Professional sports & racing, 9241 Podiatrists 3277 Drug stores
0273 Electrical work including promoters & 9415 Registered & practical nurses 5058 Fabric & needlework stores
0299 Masonry, dry wall, stone, & tile managers 9431 Offices & clinics of other 4655 Florists
0257 Painting & paper hanging 9811 Theatrical performers, health practitioners 5090 Fuel dealers (except gasoline)
0232 Plumbing, heating, & air musicians, agents, (dieticians, midwives, 4630 Gift, novelty, & souvenir shops
conditioning producers, & related speech pathologists, etc.) 4838 Hobby, toy, & game shops
0430 Roofing, siding, & sheet metal services 9886 Other health services 4671 Jewelry stores
0885 Other building trade 9613 Video tape rental 4895 Luggage & leather goods
contractors (excavation, Miscellaneous Repair, Except
9837 Other amusement & Computers stores
glazing, etc.) recreational services
9019 Audio equipment & TV repair 5074 Mobile home dealers
General Contractors Automotive Services 4879 Optical goods stores
9035 Electrical & electronic
0075 Highway & street construction 8813 Automotive rental or leasing, equipment repair, except 4697 Sporting goods & bicycle
0059 Nonresidential building without driver audio & TV shops
0034 Residential building 8953 Automotive repairs, general & 9050 Furniture repair & reupholstery 5033 Stationery stores
3889 Other heavy construction (pipe specialized 2881 Other equipment repair 4614 Used merchandise & antique
laying, bridge construction, 8839 Parking, except valet stores (except motor vehicle
etc.) parts)
8896 Other automotive services Trade, Retail—Selling 5884 Other retail stores
(wash, towing, etc.) Goods to Individuals &
Finance, Insurance, & Business & Personal Services
Related Services Households Trade, Wholesale—Selling
7658 Accounting & bookkeeping 3038 Catalog or mail order Goods to Other
6064 Brokers & dealers of securities 7716 Advertising, except direct mail
6080 Commodity contracts brokers 3046 Flea markets or shows Businesses, etc.
7682 Architectural services 3012 Selling door to door, by
& dealers; security & 6883 Authors & artists Durable Goods, Including
commodity exchanges telephone or party plan, or Machinery Equipment, Wood,
8318 Barber shop (or barber) from mobile unit
6148 Credit institutions & mortgage 8110 Beauty shop (or beautician) Metals, etc.
bankers 3053 Vending machine selling
8714 Child day care 2634 Agent or broker for other
5702 Insurance agents or brokers Selling From Showroom, Store, or firms—more than 50% of
7872 Computer programming,
5744 Insurance services (appraisal, Other Fixed Location gross sales on commission
consulting, inspection, etc.) processing, data preparation,
& related services 2618 Selling for your own account
6130 Investment advisors & services Apparel & Accessories
7922 Computer repair, maintenance, Nondurable Goods, Including Food,
5777 Other financial services & leasing 3921 Accessory & specialty stores &
furriers for women Fiber, Chemicals, etc.
7286 Consulting services
Manufacturing, Including 7799 Consumer credit reporting & 3939 Clothing, family 2675 Agent or broker for other
Printing & Publishing 3772 Clothing, men’s & boys’ firms—more than 50% of
collection services gross sales on commission
0679 Apparel & other textile 8755 Counseling (except health 3913 Clothing, women’s
3756 Shoe stores 2659 Selling for your own account
products practitioners)
7732 Employment agencies & 3954 Other apparel & accessory
1115 Electric & electronic equipment
personnel supply stores Transportation,
1073 Fabricated metal products Communications, Public
0638 Food products & beverages 7518 Engineering services Automotive & Service Stations
0810 Furniture & fixtures 7773 Equipment rental & leasing 3558 Gasoline service stations Utilities, & Related Services
0695 Leather footwear, handbags, (except computer or 3319 New car dealers (franchised) 6619 Air transportation
etc. automotive) 3533 Tires, accessories, & parts 6312 Bus & limousine transportation
8532 Funeral services & crematories 3335 Used car dealers 6676 Communication services
0836 Lumber & other wood
products 7633 Income tax preparation 3517 Other automotive dealers 6395 Courier or package delivery
7914 Investigative & protective (motorcycles, recreational 6361 Highway passenger
1099 Machinery & machine shops services
0877 Paper & allied products vehicles, etc.) transportation (except
7617 Legal services (or lawyer) chartered service)
1057 Primary metal industries 7856 Mailing, reproduction, Building, Hardware, & Garden
0851 Printing & publishing Supply 6536 Public warehousing
commercial art, 6114 Taxicabs
1032 Stone, clay, & glass products photography, & stenographic 4416 Building materials dealers
0653 Textile mill products 6510 Trash collection without own
services 4457 Hardware stores dump
1883 Other manufacturing industries 7245 Management services 4473 Nurseries & garden supply 6635 Travel agents & tour operators
8771 Ministers & chaplains stores
Mining & Mineral 6338 Trucking (except trash
8334 Photographic studios 4432 Paint, glass, & wallpaper collection)
Extraction 7260 Public relations stores
6692 Utilities (dumps, snow plowing,
1537 Coal mining 8733 Research services Food & Beverages road cleaning, etc.)
1511 Metal mining 7708 Surveying services 0612 Bakeries selling at retail 6551 Water transportation
1552 Oil & gas 8730 Teaching or tutoring 3086 Catering services 6650 Other transportation services
1719 Quarrying & nonmetallic mining 7880 Other business services 3095 Drinking places (bars, taverns,
6882 Other personal services pubs, saloons, etc.) 8888 Unable to classify
C-6