Michelle is a bank president and a weekend artist. She regularly sells her paintings at flea markets and spends an average of 9 hours a week painting or selling. Although she made about $6,000 last year from sales of artwork, she tells her friends she would do it for free. For the current tax year, she incurs expenses of $800 primarily for admission fees to flee markets and art fairs. The $800 is
I.deductible for AGI as a business expense.
II.is not deductible.
III.is deductible only because she has revenue from the activity.

Question

Michelle is a bank president and a weekend artist. She regularly sells her paintings at flea markets and spends an average of 9 hours a week painting or selling. Although she made about $6,000 last year from sales of artwork, she tells her friends she would do it for free. For the current tax year, she incurs expenses of $800 primarily for admission fees to flee markets and art fairs. The $800 is
I.deductible for AGI as a business expense.
II.is not deductible.
III.is deductible only because she has revenue from the activity.
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Quizplus · Accepted Answer

The $800 is not deductible because the activity is considered a hobby, not a business, as she would do it for free and it is not her primary source of income.

Michelle Is a Bank President and a Weekend Artist