To determine your New Jersey profit (or loss), first complete a Federal Schedule C (or Schedule C-EZ or Schedule F). To comply with New Jersey income tax law, make the following adjustments to your Federal Schedule C (or Schedule C-EZ or Schedule F):

1. Add any amount you deducted for taxes based on income.
2. Subtract interest you reported on Federal Schedule C (or Schedule C-EZ or Schedule F) which is exempt for New Jersey purposes but taxable for Federal purposes.
3. Add interest not reported on Federal Schedule C (or Schedule C-EZ or Schedule F) from states or political subdivisions outside of New Jersey which is exempt for Federal purposes.
4. Deduct the remaining 50% of meal and entertainment expenses (that were disallowed on the Federal return).
5. Add interest and dividends derived in the conduct of a trade or business.
6. Add or subtract income or losses derived in the conduct of a trade or business from rentals, royalties, patents, or copyrights.
7. Add or subtract gains or losses from the sale, exchange, or other disposition of the trade or businesss property.

Use the same accounting method (cash or accrual) that you used for Federal income tax purposes. In the case of a loss, make no entry on Line 17. Enclose a copy of the Federal Schedule C (or Schedule C-EZ or Schedule F) with your return.

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