My 14 year old son received a 1099 misc for the sale of his 4-H Steer in the amount of $1399.50. This is his only income. How do I report this? Under his own return?

[MichaelMc]

Your son will not have to file a tax return or report this income, due to the interaction of two sets of IRS regulations. You would never report your dependent's earned or self-employment income on your tax return.

If your child is being claimed as a dependent, he must file a return if any of the following apply.

1. His unearned income was more than $1,050.
2. His earned income was more than $6,300.
3. His gross income was more than the larger of—
1. $1,050, or
2. His earned income (up to $5,950) plus $350.

Finally, if your child has net earnings from self-employment of $400 or more, he must file a tax return and pay self-employment tax (the employer's and employee's share of Social Security and Medicare taxes) on that income.

The expenses of purchasing the steer, along with the cost of feed, supplies, and veterinary care, may be claimed as expenses to reduce the taxable income resulting from the eventual sale of the animal.

Under the above rules, your son might have had a reporting obligation, if the $1,399.50 he received, less his expenses, resulted in net self-employment income of $400 or more. However, the following special rule applies to 4-H and FFA projects. Since he is exempted from self-employment tax by the rule below, and he has no filing requirement under the earned income rule above, he does not have to file.

The following is taken directly from IRS Pub. 225 Farmer's Tax Guide:

"4-H Club or FFA project.   If an individual participates in a 4-H Club or National FFA Organization (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. Report the net income as “Other income” on line 21 of Form 1040. If necessary, attach a statement showing the gross income and expenses. The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. Such a project is generally not considered a trade or business."