Royalty or Schedule C Income?

[Bjorn]

Fact Pattern:
A singer and song writer hit the charts back in the 1980s. Today he receives a 1099 which shows royalty income for his song.

Does this go on Schedule E or Schedule C subject to SE tax?

Thanks.

[Bees Knees]

Report on Schedule C

Facts Patterns:

Schedule E, line 4 instructions say: “Report on line 4 royalties from oil, gas, or mineral properties (not including operating interests); copyrights; and patents…..If you are in business as a self-employed writer, inventor, artist, etc., report your royalty income and expenses on Schedule C or C-EZ.”

[Scarecrow]

Fact Pattern:

Must be an error in your fact patterns. No music from the 80’s would be worth paying royalties today.

Now the 50’s and 60’s….that’s where you'll find real rock-n-roll….

Caw….Caw….

[S T]

Taxpayer wrote a book

So if the taxpayer wrote "one" book and continues to receives "Royalties", reported on form 1099, box 2 royalties.

After writing the "one" and only book, she has written no other books. She continues to promote the book written and incurs some minor expenses.

So, she is to report on Schedule C or E?

Sandy

[Bees Knees]

Royalty

Line 4, Schedule E instructions say to report royalties from copyrights and patents on that line. But if it is a self-employment activity, it goes on Schedule C. I think the question centers on whether owning the copyright to the book is an investment, or a business. Schedule C instructions say: "an activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity." That could indicate writing just one book is not continual or regular. But then, how do you know she won't write another book the minute you decide she is not a business? The fact that she continues to promote the book could indicate she is a business. I would probably go that route.

[Mark Goldberg]

To me, if the musician reported income from music on Schedule C during the 80's then the royalties connected to that work in the new millenium are Schedule C today.
If the one time writer has always reported the icnome on Schedule E and properly amortized the expenses that went with writing it then the income is Schedule E.
The one time writer is not allowed to claim writing expenses as they are incurred. all expenses are accumulated and then written off against the income.