Page 27 - Tax Guide for Small Business

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Retail space. Retail space is real property leased, oc- b. Delivering or distributing newspapers or shopping
cupied, or otherwise used by you as a tenant in your busi- news (including any services directly related to
ness of selling tangible personal property or services to that trade or business).
the general public. 2. Substantially all your pay (whether paid in cash or not)
Qualified long-term real property. Qualified for services described above is directly related to
long-term real property is nonresidential real property that sales or other output (including performance of serv-
is part of, or otherwise present at, your retail space and ices) rather than to the number of hours worked.
that reverts to the landlord when the lease ends. 3. Your services are performed under a written contract

Exchange of like-kind property. Generally, if you ex- between you and the person for whom you perform
change real property used for business or held as an in- the services, and the contract provides that you will
vestment solely for other business or investment real not be treated as an employee for federal tax purpo-
property of a like kind, no gain or loss is recognized. This ses.
means that the gain is not taxable and the loss is not de- Executor or administrator. If you administer a de-
ductible. For more information, see Form 8824. ceased person's estate, your fees are reported on Sched-

Leasehold improvements. If a tenant erects buildings ule C if you are one of the following.
or makes improvements to your property, the increase in 1. A professional fiduciary.
the value of the property due to the improvements is not
income to you. However, if the facts indicate that the im- 2. A nonprofessional fiduciary (personal representative)
provements are a payment of rent to you, then the in- and both of the following apply.
crease in value would be income. a. The estate includes an active trade or business in
Loans. Money borrowed through a bona fide loan is not which you actively participate.
income. b. Your fees are related to the operation of that trade
or business.
Sales tax. State and local sales taxes imposed on the
buyer, which you were required to collect and pay over to 3. A nonprofessional fiduciary of a single estate that re-
state or local governments, are not income. quires extensive managerial activities on your part for
a long period of time, provided these activities are
enough to be considered a trade or business.
Guidelines for Selected If the fees do not meet the above requirements, report
Occupations them on line 8 of Schedule 1 (Form 1040 or 1040-SR).

This section provides information to determine whether Fishing crew member. If you are a member of the crew
your earnings should be reported on Schedule C (Form that catches fish or other water life, your earnings are re-
1040 or 1040-SR). ported on Schedule C if you meet all the requirements
shown in chapter 10 under Fishing crew member.
Direct seller. You must report all income you receive as
a direct seller on Schedule C. This includes any of the fol- Insurance agent, former. Termination payments you re-
lowing. ceive as a former self-employed insurance agent from an
insurance company because of services you performed
• Income from sales—Payments you receive from cus- for that company are not reported on Schedule C if all the
tomers for products they buy from you. following conditions are met.
• Commissions, bonuses, or percentages you receive • You received payments after your agreement to per-
for sales and the sales of others who work under you. form services for the company ended.
• Prizes, awards, and gifts you receive from your selling • You did not perform any services for the company af-
business. ter your service agreement ended and before the end
You must report this income regardless of whether it is re- of the year in which you received the payment.
ported to you on an information return. • You entered into a covenant not to compete against
You are a direct seller if you meet all the following con- the company for at least a 1-year period beginning on
ditions. the date your service agreement ended.
1. You are engaged in one of the following trades or • The amount of the payments depended primarily on
businesses. policies sold by you or credited to your account during
a. Selling or soliciting the sale of consumer products the last year of your service agreement or the extent to
either in a home or other place that is not a perma- which those policies remain in force for some period
nent retail establishment, or to any buyer on a after your service agreement ended, or both.
buy-sell basis or a deposit-commission basis for • The amount of the payment did not depend to any ex-
resale in a home or other place of business that is tent on length of service or overall earnings from
not a permanent retail establishment. services performed for the company (regardless of

Chapter 5 Business Income Page 25