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Royalties from creative for-profit nonbusiness activities are

reported where on a tax...
Royalties from creative for-profit nonbusiness activities are reported where on a tax return? When should advance royalties be reported in income on the tax return? The cost of wages paid for employees in training can be claimed as a business start-up expense under which of the following? 179 deduction? amortization? depreciation?
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10/3/2009
Lev
Lev, Tax Advisor
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Royalties from creative for-profit nonbusiness activities are reported where on a tax return? - schedule E

When should advance royalties be reported in income on the tax return? - in the year they are received

 

The cost of wages paid for employees in training can be claimed as a business start-up expense under which of the following? 179 deduction? amortization? depreciation?

 

Lev
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Here are additional references on royalties - I also posted in your another question - looks as you are doing a CPA exam?

 

Royalties from creative for-profit nonbusiness activities are reported on Schedule E.

see for reference - IRS publication 525 - http://www.irs.gov/pub/irs-pdf/p525.pdf

You generally report royalties in Part I of Schedule E (Form 1040), Supplemental Income and Loss.

However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040).

 

Advance royalties should be reported as income in the tax year received.

- see in the same publication

Part of future production sold. If you own mineral property but sell part of the future production, you generally treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Do not include it in your income or take depletion based on it.

When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property.

See RIA Federal Tax Handbook - Royalties

Royalties are included by cash basis taxpayers on receipt (actual or constructive), and by accrual basis taxpayers when their rights to then are fixed.

 

For 501c3 exempt organizations - royalty income is excluded from taxation under IRC 512 - http://www4.law.cornell.edu/uscode/26/usc_sec_26_00000512----000-.html

 

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