 Here we are in our example, Form 1040 populated with lesser tax software. You don't need tax software to follow along, but it's a great tool to run scenarios with. You can also get access to the Form 1040 related forms and schedules at the IRS website, irs.gov, irs.gov, starting point. We got the single-filer, Mr. Anderson, not with the W-2 income, but having a business that's flowing from the Schedule C to line number eight. Let's look at that flow through. Schedule C on the left, Profiter Laws from the Business is an Essence and Income Statement. Income minus the expenses to net income flowing into Schedule 1. There it is, line three, totaling up at the bottom, pulling into page one of the Form 1040 right there on line number eight. We also know that the Schedule C is going to have self-employment tax. So Schedule C, net income bottom line being used to calculate the Schedule S-E self-employment tax, which is calculated at the 14-129 flowing into the Schedule 2. There's the 14-129 here, which is flowing into the 1040 page two with the tax, not the income tax here, but the self-employment tax, social security and Medicare. We then know that half of that amount, going back to the Schedule C, we've got the net income being used to calculate the self-employment tax on Schedule S-E. Half of that is going to be deductible as an above-the-line deductions. We took half of that 14-129, 7065 deductible on Schedule 1 page two, which is going to be adjustments to income. There's the 7065 flowing into the Form 1040, and we see it here on line 10, bringing us down to the adjusted gross income of the 92935 standard deduction, which is a standard amount for the standard deduction, whether business or not. And then we've got the qualified business income deduction. We're reliant on the software to calculate that for now, and that gives us then the taxable income 63988. We're mirroring that over on our worksheet over here, 100,000 pulling in from the Schedule C, adjusted gross adjustments to income, gives us the AGI standard deduction, qualified business income deduction, gets us to the 63989. We're a dollar off, that's okay. Page two, calculating the income tax, 9,692, plus the self-employment tax, gets us to the total tax, 23821. We're going to imagine that we made payments of 30,000, bottom line, 6179. Okay, so now let's imagine that we go to the Schedule C over here, and we're going to go into an example of disposing of business property. Now note that when you look at the normal income statement down here, as you're making purchases or doing business, if it's an expense, then of course we're just going to record an outflow of cash, for example, as an expense, like advertising, like possibly insurance, or the phone bill, utilities, and so on, are going to be down here. But if we purchase something that's a piece of the equipment, we then may have to capitalize the equipment and record depreciation. So let's first look at that, and then we will say, well, what if we dispose of some of that equipment then? We might have a gain or loss on the disposition, and that's where our main focus is now. So let's just put a piece of equipment on the book so we can see how that kind of works. We're going to say this is going to be depreciation, and let's just call it equipment. I'm just going to say equipment number one, just a generic equipment form. It's going to go to the form Schedule C, the category, let's say it's going to be furniture and fix, let's say it's machinery, I put machinery and equipment, the date placed in service. Let's do this one for this year, 03-22-23. Let's, I'm sorry, let's say 06-15. Let's do it, do it 0-2-15-22, and the current year, the tax year we're working on. The cost or basis, let's say it was $50,000, let's say, and we're going to say the method that's going to be used will be, let's do five years, makers. We might get into the useful lives later, which would be categorized by the piece of equipment, but right now I'm just going to do this for an example so we can look at the disposition of an equipment. So I'm going to say this is going to be makers five years, is that what I picked? Five years, that's the auto limits. I just want to say makers five years, office equipment. Let's do that without the auto limits. And then when we calculate that out, it's going to be pulling over here. Now notice it's going to be taking, it took some special depreciation. That's why it's still pulled the full 50,000 here, but we didn't pull it in by just putting it on the, the schedule C as just basically an expense right off the bat, but instead still had to capitalize it and use the depreciation rules, which still may allow us to depreciate it all in one year. So in other words, if I go back to this depreciation schedule here and I look at the regular view, this is our depreciation. I know it's a little small, but you've got the date acquired, the cost or basis, and then it took the special depreciation allowance of the 50,000, which is why it's still basically giving us the whole thing as if we just expensed it in the current year. But you get the idea that we have to put it on the books as an asset and then apply whatever depreciation rules we have when the government's trying to stimulate the economy, one way they do that is try to incentivize purchases of say equipment by allowing you in essence to depreciate it all in the current year. Okay, so now let's imagine we put something on the books for the prior year that would still be depreciating in the current year. So I'm gonna go back on over and let's imagine that I have another piece of equipment. So I'm just gonna call this equipment to equip, let's say equipment number two, as a generic insert, I'm gonna say the category, I'm gonna say this happened on 01, 01, let's say two zero, let's say it's for 25,000, same method, we'll get into depreciation methods later. Just note, however, if you're taking out a new client that has a depreciation schedule, I would recommend first you wanna make sure you get the depreciation schedules, which sometimes can be difficult because sometimes they're not attached to the returns, so you gotta make sure you have those. And then I would recommend entering the data into the prior year software so we can recalculate the depreciation for the prior year to match the current tax return to make sure you have everything lined up and then roll it over into the current year. But in any case, we'll get into depreciation methods more in the future.