I:6-53 Hobby Losses. Chuck, a dentist, raises prize rabbits for breeding and showing purposes.

Assume that the activity is determined to be a hobby. During the current year, the activity generates the following items of income and expense:

Item Amount Sale of rabbits for breeding stock $800 Prizes and awards 300 Property taxes on rabbit hutches (200)

Feed (600)

Veterinary fees (500)

Depreciation on rabbit hutches (250)

a. What is the total amount of income and deductions Chuck should report for the current year with respect to the rabbit raising activities?

b. Identify which expenses may be deducted and indicate whether they are deductions for or from AGI.

c. By what amount is the cost basis of the rabbit hutches to be reduced for the year?