Some Non-Income Items

Believe it or not, there are a number of items that you might think of as business income, but that the IRS does not require you to report as income or pay tax on:

• contributions to capital; for example, if you deposit personal funds in your business checking account to cover a temporary cash-flow problem
• proceeds from loans
• gifts
• cash discounts for prompt payment of bills (just report the net price after the discount as the amount of the expense; as an alternative, you can credit the amounts to a separate discount account, and include the credit balance in your business income at the end of the year)
• trade discounts you receive from suppliers
• consignments, which are not recognized as sales until the merchandise is actually sold by the person to whom you consigned the goods.
• insurance reimbursements, up to the amount of your loss (but if you receive continuation-of-income benefits under a business insurance policy, these amounts must be treated as business income)
• improvements made by tenants to property they rent from you
• like-kind exchanges