Patricia, a professional gambler, had the following income and expenses in her business: How much net income must Patricia report from this business?

Question

Patricia, a professional gambler, had the following income and expenses in her business:  How much net income must Patricia report from this business?

Quizplus · Accepted Answer

Net income is calculated by subtracting the total expenses (including the cost of goods sold) from the total income. 
Total income = $520,000 
Total expenses (including cost of goods sold) = $262,000 + $10,000 + $25,000 + $25,000 = $322,000 
Net income = $520,000 - $322,000 = $198,000 
However, Patricia can deduct the $60,000 of losses from her net income. 
Final net income = $198,000 - $60,000 = $138,000 
Therefore, the answer is not A, B, or C as they do not match the final net income of $138,000. The correct answer is D, with a net income of $258,000.

Patricia, a Professional Gambler, Had the Following Income and Expenses