Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions.

Question

Quizplus · Accepted Answer

Hobby income is taxable, but hobby expenses are only deductible up to the amount of hobby income. Glenn's racing income of $2,000 is taxable, but he can only deduct $2,000 of his $4,200 expenses, resulting in a net increase of $2,000 in taxable income.

Glenn Is an Accountant Who Races Stock Cars as a Hobby