source:
  type: guide
  id: fnma-sel-b3-3.6-03
  authority: Fannie Mae Selling Guide B3-3.6-03 — Income or Loss Reported on IRS Form
    1040, Schedule C
  description: Fannie Mae Selling Guide B3-3.6-03 — Income or Loss Reported on IRS
    Form 1040, Schedule C.
  coverage_tier: operative
obligations:
- id: fnma-sel-b3-3.6-03-full
  canonical_id: fnma-sel-b3-3.6-03-full
  section: Fannie Mae Selling Guide B3-3.6-03 — Income or Loss Reported on IRS Form
    1040, Schedule C
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B3-3.6-03 — Income or Loss Reported on IRS
      Form 1040, Schedule C
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B3-3.6-03, Income or Loss Reported on IRS Form 1040, Schedule
      C (04/01/2009) Introduction This topic contains information on income or loss
      reported on IRS Form 1040, Schedule C, including: Income (or Loss) from a Sole
      Proprietorship Recurring vs. Non-recurring Income and Expenses Income (or Loss)
      from a Sole Proprietorship Published May 6, 2026 376 The income (or loss) from
      a borrower’s sole proprietorship is calculated on IRS Form 1040, Schedule C,
      then transferred to IRS Form 1040. The lender may need to make certain adjustments
      to the net proﬁt or loss shown on Schedule C to arrive at the borrower’s cash
      ﬂow. For example, Schedule C may include income that was not obtained from the
      proﬁts of the borrower’s business. If the lender determines that such income
      is not recurring, it should adjust the borrower’s cash ﬂow by deducting the
      nonrecurring income. See B3-3.5-02, Business Structures, for more information
      on sole proprietorships. Recurring vs. Non-recurring Income and Expenses The
      lender must determine whether income is recurring or non-recurring. Non-recurring
      income must be deducted in the cash ﬂow analysis, including any exclusion for
      meals and entertainment expenses reported by the borrower on Schedule C. The
      following recurring items claimed by the borrower on Schedule C must be added
      back to the cash ﬂow analysis: depreciation, depletion, business use of a home,
      amortization, and casualty losses. Recent Related Announcements There are no
      recently issued Announcements related to this topic.'
  judgment: false
