Alex, who is single, conducts an activity in 2016 that is appropriately classified as a hobby. The activity produces the following revenues and expenses:
Revenue ..............................................$18,000
Property taxes ..........................................3,000
Materials and supplies ................................4,500
Utilities .................................................2,000
Advertising ............................................5,000
Insurance .................................................750
Depreciation ............................................4,000
Without regard to this activity, Alex's AGI is $42,000. Determine the amount of income Alex must report, the amount of the expenses he is permitted to deduct, and his taxable income.