Priscella pursued a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is $40,000. During 2018 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 2018 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

Since the activity is deemed a hobby, Priscella cannot deduct more than her hobby income. She must report $10,000 as income on her tax return but cannot deduct any of her expenses. Therefore, the correct option is to include $10,000 in income and deduct nothing.

Priscella Pursued a Hobby of Making Bedspreads in Her Spare