Mario paints landscape portraits,and he treats the activity as a hobby.During the current year,Mario incurred the following expenses while earning $2,500 from sales of paintings:

Mario uses the standard deduction and never itemizes his deductions.How should Mario report all of the items related to his hobby on his tax return?

Question

Mario paints landscape portraits,and he treats the activity as a hobby.During the current year,Mario incurred the following expenses while earning $2,500 from sales of paintings:
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Mario uses the standard deduction and never itemizes his deductions.How should Mario report all of the items related to his hobby on his tax return?

Quizplus · Accepted Answer

Since Mario treats painting as a hobby and not as a business, he cannot deduct hobby expenses in excess of hobby income. Therefore, he cannot claim any deductions for his hobby expenses. His $2,500 in sales would be included in gross income but he cannot deduct any expenses related to his hobby. Mario selects the standard deduction since it is more favorable for him, but this does not change the answer. Option A is incorrect because hobby losses are not allowed, as stated earlier. Option B is incorrect because he cannot deduct a loss from a hobby. Option C is incorrect because he cannot deduct all his expenses related to the hobby since he did not incur them directly to earn the hobby income. Option E is incorrect because he cannot deduct more than his hobby income as expenses.

Mario Paints Landscape Portraits,and He Treats the Activity as a Hobby.During