Penny, a full-time biochemist, loves stock car racing. To feed her passion, she bought a used dirt track car and has started entering some local dirt track races. The prize money is pretty small ($1,000 for the winner), but she really is not in it for the money. Penny reported the following income and expenses from her nights at the track:
Prize Money ............................................................. $2,500
Expenses:
Transportation from her home to the races .......................... 1,000
Depreciation on the dirt track car ..................................... 4,000
Entry fees ................................................................ 3,500
Oil, gas, supplies, repairs for the dirt track car ..................... 2,050
Calculate Penny's deduction for the racing expenses assuming that the racing activity is a hobby, and Penny's AGI is $97,500 before considering the prize money.