Assume that Jill is engaged in painting as a hobby. During the current year, she earns $$1,000$ from sales of her paintings and

incurs $$1,300$ expenses for supplies and lessons. Jill's salary from her job is $$70,000.$ What is the tax treatment of the hobby

income and expenses?

A$.$ The $$1,000$ income from the hobby is included in Jill's gross income. None of the expenses are

deductible $(2018-2025),$ due to the elimination of itemized deductions subject to the $2\%$ floor $($Sec$.67($g$)).$

B$.$ After $2017,$ due to the elimination of itemized deductions subject to the $2\%$ floor $($ Sec$\mathrm{.}67(g)),$ a hobby loss of $$300$ is

reported and can be used to offset Jill's salary.

C$.$ The $$1,000$ income from the hobby is included in Jill's gross income, and $$1,300$ in expenses are deductible as an

itemized deduction subject to the $2\%$ of AGI limit$.$

D$.$ The $$1,000$ income from the hobby is included in Jill's gross income, offset by the allowable hobby expenses

of $$1,000,$ leaving no profit or loss.