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