1040 Preparation and Planning 6: Gross Income: Business, Farm, and Rental Income (2024)

Author: Barbara Weltman, Sidney Kess, Greg White

Per the IRS Education Provider Standards this course must be COMPLETED by 12/31/2026 to receive credits

This six-hour CPE course, the sixth in the 1040 Preparation and Planning series, covers income and expenses of sole proprietors and independent contractors on Schedule C, farm income and expenses on Schedule F, and rents and royalties on Schedule E. Tax developments reflected in this course, including the Consolidated Appropriations Act, 2023 (including SECURE Act 2.0), the Inflation Reduction Act of 2022, and other tax legislation, IRS pronouncements, and court decisions, are extensive. They impact 2023 tax year returns that will be filed during the 2024 filing season and refund opportunities for earlier years; as well as point the way to strategic planning in 2024 and beyond. This course brings the tax preparer "up-to-speed" in preparing 2023 tax returns for the 2024 filing season.

Publication Date: September 2023

Topics Covered

• Business Income and Expenses
• Spousal Businesses
• Business Deductions
• Reasonableness of Salaries
• What Constitutes a Trade or Business?
• Examples of Common Ordinary and Necessary Business Expenses
• Interest Expense Limitations
• Start-Up Expenses
• Advertising Expenses
• Business Bad Debts
• Loans by Shareholder-Employees
• Recovery of Bad Debts
• The Nonaccrual-Experience Method
• Statute of Limitations for Bad Debts
• Explanation of Bad Debt Deduction on Tax Return
• Bribes and Kickbacks
• Fines and Penalties
• Lobbying Expenses
• Interest on Tax Deficiencies
• Repairs and Maintenance Costs
• Capital Expenditure
• Repair
• Capital Items
• Environmental Cleanup
• Research and Development Expenditures
• Carrying Charges, Interest, and Taxes on Real Estate
• Travel Expenses
• Expenses of Self-Employed Persons
• Expenses of Employees
• Accountable Plans
• Considerations for "Reasonable Time"
• Types of Expenses
• Expenses that are Part Business, Part Personal
• Traveling Expenses
• Spouse or Other Travel Companion
• Investment Seminars
• Foreign Conventions
• Cruise Ships
• Temporary Jobs Away from Home
• Commuting Expenses
• Deducting Vehicle Expenses
• Standard Mileage Rate Exclusions
• Dollar Limits
• Nonpersonal Use Vehicles
• Changing Write-off Methods
• Rural Letter Carriers
• Deducting the Costs of a Leased Car
• Entertainment Expenses
• Club Dues
• Business Meals
• Exceptions to the 50% Limitation Rule
• Business Gifts
• Nonqualified and Qualified Plan Awards (Tangible Property)
• Substantiation of Travel Expenses and Gifts
• Recording of Expenditures
• Per Diem Allowances
• Self-employed Persons
• Statutory Employees
• Employees
• Investment Expenses
• Home Office Expenses
• Exceptions to Exclusive Use Test
• Home Office Deduction
• Direct and Indirect Expenses
• Gross Income Limit
• Home Office Telephone
• Educational Expenses
• Deductible Expenses
• Depreciation
• Depreciation Deduction
• Failure to Take Depreciation
• Basis for Determining Depreciation
• Classes of Property
• Classes of Property under MACRS
• Classes of Property for Depreciation
• Half-Year Convention
• Mid-Quarter Convention
• Property Placed in Service
• Real Property
• "Qualified Improvement Property"
• Section 179 Deduction
• Qualifying Section 179 Property
• Section 179 Expenses Not Allowed
• Taxable Income Limitation
• Recapture of Expensing
• Electing Expensing
• Bonus Depreciation
• Eligible Property
• Election Out of Bonus Depreciation
• Alternative Depreciation System (ADS)
• Limits on Depreciation for Mixed-use Property
• Property Not Predominantly Used in Business
• Change of Depreciation Methods
• IRS Procedures
• Depreciation Recapture
• Amortization
• Section 197 Intangibles
• Trademark Expenditures
• Business Start-up Expenditures
• Organizational Costs
• Depletion
• Business Losses
• Net Operating Losses
• Farm Income and Expenses
• Other Income Items
• Commodity Credit Corporation (CCC) Loans
• Deductions
• Rents and Royalties
• Passive Activity Loss (PAL) Rules
• Tests to Determine Material Participation
• Rental of a Home ("Vacation Homes")
• Qualified Business Income Deduction

Learning Objectives

• Explain how to complete Schedule C
• Determine eligibility for and report deductions on a range of business expenses
• Describe how to report deductions for travel-away-from-home costs
• Determine whether meal cost limitations apply
• Describe how to calculate deductions for business vehicle use
• Describe how to figure the home office deduction
• Explain property depreciation, first-year expensing, bonus depreciation, and depreciation recapture
• Recognize how to apply the rules for amortization, depletion, different types of losses, and bad debts
• Identify expenses subject to amortization
• Describe how to figure depletion deductions
• State how to apply the limits on trade or business losses
• Determine net operating losses
• Determine whether a debt is a business or nonbusiness bad debt
• List special deductions for farming activities
• Recognize how to apply the passive activity loss rules to businesses and rental activities
• Determine when losses from the rental of a home are deductible
• Recognize how to figure the qualified business income deduction

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Taxes (6 hours)

Program Prerequisites
1040 Preparation and Planning: Fundamentals or basic understanding of Form 1040.

Advance Preparation
None