Katie operates a ceramics studio from her garage.She incurs the following expenses:
$\begin{array}{ll}
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & \$ 400 \
\text { Pottery wheel } & \$ 75 \
\text { Utilities for the ceramic studio } & \$ 375\
\text { Personal property taxes on ceramic equipment }&\$50
\end{array}$ Katie's gross receipts from her business were $2,000.
a.If the studio is deemed to be a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.
b.If the studio is not a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.

Question

Katie operates a ceramics studio from her garage.She incurs the following expenses:
 $\begin{array}{ll}
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & \$ 400 \
\text { Pottery wheel } & \$ 75 \
\text { Utilities for the ceramic studio } & \$ 375\
\text { Personal property taxes on ceramic equipment }&\$50
\end{array}$ Katie's gross receipts from her business were $2,000. 
a.If the studio is deemed to be a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.
b.If the studio is not a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.

Quizplus · Accepted Answer

The Answer of Katie operates a ceramics studio from her garage.She incurs the following expenses:
 $\begin{array}{ll}
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & \$ 400 \
\text { Pottery wheel } & \$ 75 \
\text { Utilities for the ceramic studio } & \$ 375\
\text { Personal property taxes on ceramic equipment }&\$50
\end{array}$ Katie's gross receipts from her business were $2,000. 
a.If the studio is deemed to be a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.
b.If the studio is not a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.

Katie Operates a Ceramics Studio from Her Garage Katie's Gross Receipts from Her Business Were $2,000