Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows:
Supplies
$4,000
Interest on loan to get business started
500
Advertising
6,500

Assuming that the activity is deemed a hobby,how should she report these items on her tax return?
A)Include $10,000 in income and deduct $11,000 for AGI.
B)Ignore both income and expenses since hobby losses are disallowed.
C)Include $10,000 in income,deduct nothing for AGI,and claim $11,000 of the expenses as itemized deductions.
D)Include $10,000 in income and deduct interest of $500 for AGI.
E)None of the above.

Question

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows:
Supplies
$4,000
Interest on loan to get business started
500
Advertising
6,500
​
Assuming that the activity is deemed a hobby,how should she report these items on her tax return?
A)Include $10,000 in income and deduct $11,000 for AGI.
B)Ignore both income and expenses since hobby losses are disallowed.
C)Include $10,000 in income,deduct nothing for AGI,and claim $11,000 of the expenses as itemized deductions.
D)Include $10,000 in income and deduct interest of $500 for AGI.
E)None of the above.

Quizplus · Accepted Answer

The Answer of Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows:
Supplies
$4,000
Interest on loan to get business started
500
Advertising
6,500
​
Assuming that the activity is deemed a hobby,how should she report these items on her tax return?
A)Include $10,000 in income and deduct $11,000 for AGI.
B)Ignore both income and expenses since hobby losses are disallowed.
C)Include $10,000 in income,deduct nothing for AGI,and claim $11,000 of the expenses as itemized deductions.
D)Include $10,000 in income and deduct interest of $500 for AGI.
E)None of the above.

Priscella Pursued a Hobby of Making Bedspreads in Her Spare