 So then we have damages. You must include in gross income compensation you receive during the tax year as a result of any of the following injuries connected with your business. You got the patient infringement, the patent infringement, breach of contract or fiduciary duty, antitrust injuries, economic injury. So you may be entitled to deduct against income if it compensates you for actual economic injury. Your deduction is the smaller of the following amounts. The amounts you received or accrue for damages in the tax year reduced by the amount you pay or incur in tax year for recover that amount. So obviously if you have a damages type of situation, then you're going to be getting payments. And then the question is, do you have to include those amounts as income? And if they're an income, you also might then think what about the damages that I have or the economic injury, which would be the expense side of things. Notice we're talking about a net income of course, income minus the expenses is the net result that's going to be basically taxed on income being bad expenses or deductions being good. So your loss from the injury that you have not yet deducted. So punitive damages, so these are damages possibly not to recover the injury, but to punish the person. And therefore you're going to be receiving generally income for punitive damages and some lawsuit for that type of situation. So you must also include punitive damages in income as you would expect. So there's not going to be any expenses, in other words, related to the punitive damages you would expect because again, they're not recouping from damages, but are punitive in nature. So kickbacks, if you receive any kickbacks include them in your income on schedule C. However, do not include them if you properly treat them as a reduction of a related expense item, a capital expenditure or cost of goods sold. So we got the recovery of items previously deducted. If you recover a bad debt or any other item deducted in a previous year include the recovery in income on schedule C. So in other words, you might have said, I had income on a cruel basis. Let's say I earned the income, I recorded income, then I had a receivable. I was expecting people to pay me. They didn't pay me. And so I thought it was bad debt. So then I wrote it off as bad debt, taking an expense at that point in time. And then in the future, they actually paid me. Well, now I have a situation where I already wrote it off in the prior year, meaning I got a benefit from taxes. So do I have to amend the prior year tax return? Generally no, we would think we're going to include it in income in the current year to kind of reconcile the situation. However, if all or part of the deduction in an earlier years did not reduce your tax, you can exclude part that did not reduce your tax. So if you're in a situation for whatever reason, you didn't get a tax benefit from that happening in the prior year. This is a similar scenario to like state sales tax that oftentimes tax preparers are familiar with where you got to deduct the state. Did you get a deduction for the state sales tax? You would only have done that if you had a schedule C, for example. And then if you got a refund to the sales tax, the question is, well, did you get a benefit from the sales tax deduction last year as to whether or not you need to record it in income in the current year? So if you exclude part of the recovery from income, you must include with your return a computation showing how you figured the exclusion exception for depreciation. This rule does not apply to depreciation. You recover depreciation using the rules explained next. So now we've got the recapture of depreciation. So in the following situations, you have to recapture the depreciation deduction. This means you include in income part or all of the depreciation you deducted in previous years listed property. So if your business used, if your business use of listed property explained in chapter eight under depreciation falls to 50% or less in a tax year after the tax year you place the property in service, you may have to recapture part of the depreciation reduction. So you do this by including in income on schedule C part of the depreciation you deducted in previous years. You can use part four of form 4797 to figure the amount to include in income on schedule C. For more information, you can see what is the business use requirement in chapter five of publication nine four six. That chapter explains how to determine whether property is used more than 50% in your business.