Question

What is the difference between Schedule C and Schedule E income (i.e. when would the same...

What is the difference between Schedule C and Schedule E income (i.e. when would the same source of income appear on one schedule or the other)?

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Answer #1

When the income is of Active Nature it is reported as Schedule C Income. Active Income means when a person do some activity and work to earn it. The person earning the income actively and materially participates in the production of the income then it is Active Income.

When the income is of Passive Nature it is reported as Schedule E Income. Passive Income means when a person does not do any activity and work to earn it. The person earning the income does not actively and materially participates in the production of the income then it is Passive Income.

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