Derrick owns a farm in eastern North Carolina. A hurricane hit the area (a national disaster area was declared) and destroyed a farm building and some farm equipment and damaged a barn. Item Building Equipment Barn FMV FMV Adjusted before after Basis Damage Damage $85,000 $115,000 $ 0 68,000 49,000 0 95,000 145,000 95,000 Insurance Proceeds $55,000 15,000 35,000 Due to the extensive damage throughout the area, the president of the United States declared all areas affected by the hurricane as a disaster area. Derrick, who files a joint return with his wife, had $45,000 of taxable income last year. Their taxable income for the current year is $150,000, excluding the loss from the hurricane. Required: a-1. Calculate the amount of the loss deductible by Derrick and his wife. a-2. What amount of loss should be adjusted against current and last year? a-1. a-2 Loss Amount Last year Current year Rebecca is a doctor with an AGI of $125,000 before consideration of income or loss from her dog breeding business. Her home is on 15 acres, 10 of which she uses to house the animals and provide them with ample space to play and exercise. Her records show the following related income and expenses for the current year: $2,500 Income from fees and sales Expenses: Dog food Veterinary bills Supplies Publications and dues $4,000 3,500 1,200 350 Required: a. How must Rebecca treat the income and expenses of the operation if the dog breeding business is held to be a hobby? b. How would your answer differ if the operation were held to be a business? (Enter all losses with a minus sign.) a. Schedule C Business income/(loss) Other Income/(loss) Expenses - (Schedule A - Misc. Deductions) b. Schedule C Business income/(loss) Other Income/(loss) Expenses - (Schedule A - Misc. Deductions)