IRS Stats Show Growth In Sole Proprietorships' Profits

by Leroy Baker, Tax-News.com, Washington

05 September 2007

The US Internal Revenue Service has announced the release of the summer 2007 issue of the Statistics of Income Bulletin, featuring data from 21.5 million individual income tax returns that reported non-farm sole proprietorship activity in tax year 2005.

Profits from all non-farm sole proprietorships totaled $269.9 billion in 2005, up 9% from tax year 2004. After adjusting for inflation, profits rose by 5.5% in 2005, which is the biggest year-to-year increase since a 7.2% gain in 1998.

The real estate and rental leasing sector posted a 19.4% gain in profits, which was the biggest in percentage terms among the sector categories. Transportation and warehousing was second highest with a 15.5% profit gain. Retail trade was third, with a 14.6% increase. (The sector-specific figures have not been adjusted for inflation.)

Wholesale trade (merchant wholesalers) was the only sole proprietor industrial sector to post a profit decline in tax year 2005, of 3.5%.

The Bulletin also includes articles about:

• Foreign-controlled domestic corporations (FCDCs): These companies are relatively few in number but their economic impact is big. For example, FCDCs were just 1% of all US corporations in tax year 2004 but accounted for 13.5% of all US corporate receipts that year, totaling $3.1 trillion. FCDCs had a US tax liability of $29.9 billion in 2004.
• Federal excise taxes: Federal excise tax receipts totalled $76.1 billion in fiscal year 2006. This represented a 1.2% increase from the previous year, and a 35.9% gain from 1996. Excise taxes, levied on the manufacture, sale or consumption of certain goods or services, accounted for 3% of total receipts for the US government in fiscal year 2006.
• Estate tax returns: The total number of estate tax returns filed fell by 58% to about 45,000 in 2005 from around 108,000 in 2001. The total amount of assets represented by these returns also fell, but by far less. Total gross estate (assets) on these returns fell by 14% to $185 billion in 2005, from $216 billion in 2001. Meanwhile, net estate taxes reported on these returns declined by even less, only 8%.

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