Virginia, a practicing CPA, receives $11,000 from the sale of rare orchids that she grows. Her expenses of operating this hobby activity follow:
?
$\begin{array}{lr}
\text { Property taxes on the structures } & \$ 4,500 \
\text { Seeds, fertilizer, and bug sprays. } & 8,000 \
\text { Depreciation on the structures } & 5,000
\end{array}$
How much of the expenses that Virginia incurs can be deducted by her?
A)$- 0 -
B)$4,500
C)$11,000
D)$12,500
E)$17,500

Question

Virginia, a practicing CPA, receives $11,000 from the sale of rare orchids that she grows. Her expenses of operating this hobby activity follow:
?
$\begin{array}{lr}
\text { Property taxes on the structures } & \$ 4,500 \
\text { Seeds, fertilizer, and bug sprays. } & 8,000 \
\text { Depreciation on the structures } & 5,000
\end{array}$ 
How much of the expenses that Virginia incurs can be deducted by her?
A)$- 0 -
B)$4,500
C)$11,000
D)$12,500
E)$17,500

Quizplus · Accepted Answer

Virginia can deduct the expenses that she incurred in operating her hobby as long as they do not exceed the amount of income she earned. In this case, her expenses totaled $4,500 which is less than the $11,000 income she earned from the orchids. Therefore, she can deduct all of her expenses and reduce her taxable income by $4,500. Option A is incorrect because Virginia has expenses that can be deducted; Option C is incorrect because she can deduct expenses up to the amount of income earned; Option D is incorrect because her expenses are less than her income; Option E is incorrect because it is not a valid choice among the given options.

Virginia, a Practicing CPA, Receives $11,000 from the Sale of Rare