Instructions For Schedule F - Profit Or Loss From Farming Form 2006 (Page 6 of 7) in pdf

Enter on line 26b amounts paid to rent

Do not include fines or penalties paid to a

tions for Schedule C, lines 24a and 24b,

or lease other property such as pasture or

government for violating any law.

that begin on page C-5.

farmland.

Any loss from this

If you had

At-risk loss deduction.

Preproductive period expenses.

activity that was not allowed as a deduction

preproductive period expenses in 2006 that

last year because of the at-risk rules is

you are capitalizing, enter the total of these

Line 27

treated as a deduction allocable to this ac-

expenses in parentheses on line 34f and

tivity in 2006. However, for the loss to be

enter “263A” in the space to the left of the

Enter amounts you paid for repairs and

deductible, the amount “at risk” must be

total.

maintenance of farm buildings, machinery,

increased.

and equipment. You can also include what

For details, see page F-4, Capitalizing

you paid for tools of short life or minimal

costs of property, and Pub. 225.

See Pub. 535.

Bad debts.

cost, such as shovels and rakes.

Business start-up costs.

If your business

Do not deduct repairs or maintenance on

began in 2006, you can elect to deduct up to

Line 35

your home.

$5,000 of certain business start-up costs.

This limit is reduced (but not below zero)

If line 34f is a negative amount, subtract the

by the amount by which your start-up costs

amount on line 34f from the total of lines

exceed $50,000. You can elect to amortize

Line 31

12 through 34e. Enter the result on line 35.

any remaining qualified business start-up

You can deduct the following taxes on this

costs over 180 months. For details, see Pub.

line.

225. For amortization that begins in 2006,

Line 36

•

you must complete and attach Form 4562.

Real estate and personal property

taxes on farm business assets.

If you have a loss, the amount of loss you

You may be

Business use of your home.

•

can deduct this year may be limited. Indi-

Social security and Medicare taxes

able to deduct certain expenses for business

viduals, estates, and trusts must complete

you paid to match what you are required to

use of your home, subject to limitations.

line 37 before entering the loss on line 36.

withhold from farm employees’ wages and

Use the worksheet in Pub. 587 to figure

If you checked the “No” box on Schedule

any federal unemployment tax paid.

your allowable deduction. Do not use Form

•

F, line E, also see the Instructions for Form

8829.

Federal highway use tax.

8582.

Refor-

Forestation and reforestation costs.

Do not deduct the following taxes on

Enter the net profit or deductible loss

estation costs are generally capital expendi-

this line.

here and on Form 1040, line 18, and Sched-

tures. However, for each qualified timber

•

Federal income taxes, including your

ule SE, line 1. Nonresident aliens — enter

property you can elect to expense up to

self-employment tax. However, you can

the net profit or deductible loss here and on

$10,000 ($5,000 if married filing sepa-

Form 1040NR, line 19. Estates and

deduct one-half of your self-employment

rately) of qualifying reforestation costs

trusts — enter the net profit or deductible

tax on Form 1040, line 27.

paid or incurred in 2006. This limit is in-

•

loss here and on Form 1041, line 6. Partner-

Estate and gift taxes.

creased for small timber producers with

ships — do not complete line 37; instead,

•

qualified timber property located in the GO

Taxes assessed for improvements,

stop here and enter the profit or loss on this

Zone, the Rita GO Zone, or the Wilma GO

such as paving and sewers.

line and on Form 1065, line 5 (or Form

•

Zone. For GO Zone information, see Pub.

Taxes on your home or personal use

1065-B, line 7).

4492.

property.

•

If you have a net profit on line 36, this

You can elect to amortize the remaining

State and local sales taxes on property

amount is earned income and may qualify

costs over 84 months.

purchased for use in your farming business.

you for the earned income credit if you

Instead, treat these taxes as part of the cost

The amortization election does not ap-

meet certain conditions. See the instruc-

of the property.

ply to trusts and the expense election does

tions for Form 1040, lines 66a and 66b, for

•

Other taxes not related to your farm-

not apply to estates and trusts. For details

details.

ing business.

on reforestation expenses, see Pub. 225.

For amortization that begins in 2006, you

must complete and attach Form 4562.

Line 37

Line 32

You can deduct

GO Zone clean-up costs.

Generally, if you have a loss

At-risk rules.

50% of any qualified GO Zone clean-up

Enter amounts you paid for gas, electricity,

from a farming activity and amounts in-

costs paid or incurred in 2006 for the re-

water, and other utilities for business use on

vested in the activity for which you are not

moval of debris from, or the demolition of

the farm. Do not include personal utilities.

at risk, you must complete Form 6198 to

structures on, real property located in the

You cannot deduct the base rate (including

figure your allowable loss. The at-risk rules

GO Zone that is used in your farming busi-

taxes) of the first telephone line into your

generally limit the amount of loss (includ-

ness. The rest of the GO Zone clean-up

residence, even if you use it for your farm-

ing loss on the disposition of assets) you

costs must be capitalized. See Pub. 4492

ing business. But you can deduct expenses

can claim to the amount you could actually

for the areas included in the GO Zone and

you paid for your farming business that are

lose in the activity.

the applicable dates for this deduction.

more than the cost of the base rate for the

Check box 37b if you have amounts in-

first phone line. For example, if you had a

Legal and professional fees.

You can de-

vested in this activity for which you are not

second phone line, you can deduct the busi-

duct on this line fees for tax advice related

at risk, such as the following.

ness percentage of the charges for that line,

to your farming business and for the prepa-

•

including the base rate charges.

Nonrecourse loans used to finance the

ration of the tax forms related to your farm-

activity, to acquire property used in the ac-

ing business.

tivity, or to acquire the activity that are not

Gener-

secured by your own property (other than

Travel, meals, and entertainment.

Lines 34a Through 34f

ally, you can deduct expenses for farm

property used in the activity). However,

Include all ordinary and necessary farm ex-

business travel and 50% of your business

there is an exception for certain nonre-

penses not deducted elsewhere on Schedule

meals and entertainment. But there are ex-

course financing borrowed by you in con-

F, such as advertising, office supplies, etc.

ceptions and limitations. See the instruc-

nection with holding real property.

F-6

Instructions For Schedule F - Profit Or Loss From Farming Form 2006 Page 6

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