Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses:

Sales $ 5,000 Depreciation on greenhouse 10,000 Fertilizer, soil, pots 1,500

a. What are the factors that the IRS will consider when evaluating whether the activity is a business or a hobby?

b. If the activity is deemed to be a regular business, what is the amount of Lew’s loss from the activity?

$

c. If the activity is deemed to be a hobby, what is the amount of Lew’s expenses

(if any) from the activity that may be deducted?