$37$ 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 Expenses:

Transportation from her home to the races

Depreciation on the dirt$-$track car

Entry fees

Oil, gas, supplies, repairs for the dirt track car

$$2,500$

$1,000$

$4,000$

$3,500$

$2,050$

What are the tax effects of Penny's racing income and expenses assuming that the racing activity is a hobby for Penny?