Harold conducts a business with the following results for the year:
Revenue ......................................................... $20,000
Depreciation on car .............................................. 3,960
Operating expenses of car ....................................... 3,100
Rent ............................................................... 6,000
Wages ............................................................. 8,200
Amortization of intangibles ...................................... 680
Harold estimates that due to a depressed real estate market, the value of land owned by the business declined by $5,200.
a. Calculate the effect of Harold's business on his AGI.
b. How would your answer in part (a) change if the activity was a hobby?