Irs Publication 595 - Tax Highlights For Commercial Fishermen

nontaxable use, you may be eligible to buy it tax

business code for commercial fishing shown in

Line 15. Frank’s $3,291 deduction is for insur-

free.

the instructions for Schedule C. He then com-

ance on his business property (65% of his truck

pletes items C through H.

insurance is included on line 10). The deduction

Gasoline. Your supplier may be able to sell

is only for premiums that give him coverage for

you gasoline at a tax-free price only for use in a

the year.

boat engaged in commercial fishing.

Part I — Income

Your supplier may be eligible to claim a credit

Line 16b. Frank borrowed money to buy his

or refund of the excise tax on the gasoline sold

Frank figures his gross income from fishing in

fishing boat. The interest on this loan was $800

to you at a tax-free price. Refer your supplier to

Part I.

for the year.

Credits and Refunds under Gasoline in Publica-

Line 1. Frank had sales of $60,288 for the

tion 510, Excise Taxes for 2002, for details.

Line 20b. His rent for his mooring space was

year. This includes all the fish he caught and

To buy gasoline at a tax-free price, give your

$50 a month, or $600 for the year.

sold during the year. He enters his total sales on

supplier a signed certificate identifying you and

line 1.

stating that you will use the gasoline in a boat

Line 21. He spent $3,600 for boat repairs and

engaged in commercial fishing. You do not need

$993 for gear repairs for a total cost of $4,593.

Line 3. Because Frank did not have any re-

to renew the certificate as long as the informa-

turns and allowances to report on line 2, line 3 is

tion it contains continues to be correct. See

Line 22. He spent $1,713 for boat supplies

the same as line 1.

Table 4 for a sample exemption certificate.

and $4,751 for bait and ice for a total cost of

Line 5. Because Frank did not have any cost

$6,464.

of goods sold to report on line 4, line 5 is the

same as line 3.

Line 23. Frank renewed his fishing license. He

Schedule C Example

enters the $35 state fee on this line.

Line 6. Frank’s entry of $712 represents a

$612 patronage dividend he received from his

Frank Carter is a sole proprietor who owns and

Line 27. Frank enters the total of his other

local cooperative and a $100 fuel tax credit he

operates a fishing boat. He uses the cash

fishing expenses on this line. These expenses

claimed on the 2000 Form 1040 he filed on

method of accounting and files his return on a

are not included on lines 8 – 26. He lists the type

March 1, 2001. The patronage dividend was

calendar year basis. He keeps his business rec-

and the amount of the expenses separately in

reported to him on Form 1099 – PATR, Taxable

ords with a single-entry bookkeeping system,

Part V of page 2 (not shown) and carries the

Distributions Received From Cooperatives.

similar to the sample record system illustrated in

total entered on line 48 to line 27. His only entry

Publication 583.

on this line is the $6,367 he spent on fuel for his

Line 7. Frank’s gross income from fishing in-

Frank has two crew members, Nan Brown

fishing boat.

cludes his gross profit from line 5 and his other

and Sandy Green, who are considered self-em-

income from line 6.

ployed for social security, Medicare, and federal

Line 28. Frank adds all his expenses listed in

income tax withholding purposes. After certain

Part II and enters the total on this line.

boat operating expenses are paid, the proceeds

Part II— Expenses

from the sale of the catch are divided 75% to

Line 29. He subtracts his total expenses,

Frank and 25% to his crew members.

Frank enters his fishing expenses in Part II.

$42,439 (line 28) from his gross income from

Frank figures his net profit or loss from his

fishing, $61,000 (line 7). Frank has a tentative

Line 10. Frank used his truck 65% for busi-

fishing business by subtracting his fishing ex-

profit of $18,561.

ness during the year. He spent a total of $4,250

penses from his gross income from fishing on

for gas, oil, insurance, tags, repairs, and up-

Schedule C. He then reports the net profit or loss

Line 30. Frank did not use any part of his

keep. He can deduct $2,763 (65% × $4,250), the

on line 12, Form 1040.

home for business, so he does not make an

business portion of these expenses, on line 10.

entry here.

Schedule C (Form 1040)

Line 11. Frank paid his crew members total

Line 31. Frank has a net profit of $18,561 (line

crew shares of $10,992 for the year.

First, Frank fills in the information required at the

29 minus line 30). He enters his net profit here,

top of Schedule C. On line A he enters “Fishing”

Line 13. Frank enters $6,534 depreciation

on line 12 of Form 1040, and on line 2, Section A

and on line B he enters 114110, the 6-digit

from Form 4562 (not shown).

of Schedule SE (Form 1040), not shown.

Page 11

Irs Publication 595 - Tax Highlights For Commercial Fishermen - 2001 Page 11

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