Katie operates a ceramics studio from her garage. She incurs the following expenses: $$\begin{array} { l r }
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & 400 \
\text { Pottery wheel } & 75 \
\text { Utilities for the ceramic studio } & 375 \
\text { Personal property taxes on ceramic equipment } & 50
\end{array}$$ 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: $$\begin{array} { l r } 
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & 400 \
\text { Pottery wheel } & 75 \
\text { Utilities for the ceramic studio } & 375 \
\text { Personal property taxes on ceramic equipment } & 50
\end{array}$$ 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: $$\begin{array} { l r } 
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & 400 \
\text { Pottery wheel } & 75 \
\text { Utilities for the ceramic studio } & 375 \
\text { Personal property taxes on ceramic equipment } & 50
\end{array}$$ 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