CAN SIGNING A LEASE QUALIFY AS STARTING A BUSINESS UNDER OHIO TAX LAW?

Since royalties and bonus payments are considered as earned income and a lease is basically a form of partnership contract, can signing a lease be considered the same as starting a new business in order to get tax breaks for starting a new business in Ohio? Can I start OILDUDE PETROLEUM CO. and use my royalties and bonus payments as company profits? Also you can take $5000 dollars off your taxes the first year for starting a new business in Ohio. 

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Permalink Reply by Angela Smith on April 22, 2012 at 3:43pm

Since when are royalties and bonus payments considered earned income? 

Permalink Reply by Billy Park Whyde on April 22, 2012 at 3:46pm

Probably when the first liberal thought of a way to increase taxes for his liking. 

Permalink Reply by oildude on April 22, 2012 at 4:13pm

I could be wrong. How are royalties and bonus money taxed? 

Permalink Reply by Billy Park Whyde on April 22, 2012 at 4:28pm

IRS as earned income.  A whole thread about taxes here and suggested ways of reducing the tax rate as well. http://gomarcellusshale.com/forum/topics/minimizing-tax-consequences

Permalink Reply by Angela Smith on April 22, 2012 at 6:23pm

Royalties are reported on schedule E and are unearned income.  You still pay taxes on the money (minus a 15% depletion) but you don't pay social security tax on this money.

Permalink Reply by Michael Dolezal CPA on April 22, 2012 at 7:39pm

Bonus and Royalties are considered royalty income unearned income reported as a Schedule E income (like a rental property) and are taxed at ordinary income rates. It could possibly be structured into a business, but you would need to consider economic substance. The link to the tax forum provides little information on the taxation. Their is a tax strategy if applied can provide you to defer the the lease bonus payments into future years, but their is some hoop jumping. If any would like further information regarding the taxation of bonus payments or royalties, please friend me and contact me directly. I am a CPA and Relator.

Permalink Reply by Billy Park Whyde on April 22, 2012 at 8:51pm

ty for the correction. 

Permalink Reply by Dan on April 22, 2012 at 6:37pm

Looks like we might be subject to Ohio's CAT tax ( Commercial Activity Tax ) as well.

Permalink Reply by Mike h on April 22, 2012 at 8:54pm

No might about it. I'm getting ready to pay my $150.

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