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