Income - Business Income Deduction FAQs

What is business income?

ORC 5747.01(B): “Business Income” means income, including gain/loss…

 

  • Arising from transactions, activities, & sources in the regular course of a trade or business operation (“Transactional Test”).
  • From real, tangible, and intangible property if the acquisition, rental, management, and disposition of the property constitute integral parts of the regular course of a trade or business operation (“Functional Test”).
  • From a partial or complete liquidation of a business, including gain or loss from the sale or other disposition of goodwill.  

Business income could include the following… 

  • Distributive or proportionate shares of income from a pass-through entity (including a partnership, S Corporation, or LLC)
  • Income from a sole proprietorship
  • Income from farming
  • Compensation or guaranteed payments made by a pass-through entity to a 20% investor under ORC 5733.40(A)(7)

Business income could also include the following if received in the ordinary course of a trade or business operation:

   Royalties from real or tangible property

      Rents from real or tangible property 

      Capital gains 

      Interest 

      Dividends and distributions

      Patent, copyright royalties