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: Assuming that the activity is deemed a hobby,how should she report these items on her tax return?

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:  Assuming that the activity is deemed a hobby,how should she report these items on her tax return?

Quizplus · Accepted Answer

If Priscella's activity is deemed a hobby, she must report the $10,000 of income on her tax return. She cannot deduct the $11,000 of expenses for AGI because hobby losses are disallowed. However, she can claim $10,000 of the expenses as itemized deductions on Schedule A. Therefore, the correct choice is C.

Priscella Pursued a Hobby of Making Bedspreads in Her Spare