Proprietorships

• Author: Jack Zuckerman
• Pages: 1-12

¾FACT PATTERN FOR SOLO

PRACTITIONER

Roberta Doctor, M.D., operates a medical practic e

as a solo practitioner. She must report her tax able

practice inc ome on Schedule C of her indiv idual

income tax ret urn. A copy of her 2013 Schedule C

is presented and referenced in thi s section.

¾FACT PATTERN FOR BUSIN ESS

INVOLVED IN SALE OF PRODUCTS

Howard Shopowner operates three p et stores. He

also must report ta xable income on Schedule C

of his individua l income tax return. A copy of his

2013 Schedule C is presented and referenc ed in

this se ction.

¾PURPOSE OF SCHEDU LE C

Anyone who operates a business or a professional

practice as a sole propr ietorship or a single member

LLC must complete Schedule C of the ind ividual

income tax retu rn. If individuals operate sep arate

sole proprietorships, a Schedule C is require d for

each busines s. Husband and wife may each oper-

ate separate sole proprietorships, in which c ase

each must le a sepa rate Schedule C.

¾SECTIONS OF THE SCH EDULE

Unlike other partnership and corporate in come

tax retur ns, Schedule C does not conta in a sec-

tion for a balance sheet. As a resu lt, a complete

nancial overv iew of the business is not available

from the tax retur n itself. Schedule C doe s, how-

ever, provide important information c oncerning

the annual tax able income from the practice or

business. Form 4562 of the individual inc ome tax

return and suppor ting schedules may provide data

on cost basis and the depr eciation history of the

xed assets of a busi ness.

Schedule C is div ided into ve sections. The rst

section, lines A through J, contain questions on

the type of ac counting method used and whether

the taxpayer “material ly participated” in the busi-

ness. Part I: Income, Par t II: Expenses, Part III:

1

PART ONE:

PROPRIETORSHIPS

Schedule C:

Prot or Loss

from Business