Hobby expenses - Effect on A.G.I. C is a successful attorney and stock car racing enthusiast. This year she decided to quit watching the raaces and start participating. She purchased a car and entered several local races. During the year, she had the following receipts and disbursements related to the racing activities:

Race winnings...................................... $3,000

Property taxes......................................2,800

Fuel supplies, maintenance.....................1,000

Her A.G.I. exclusive of any items related to the racing activities is $100,000.

a. Indicate the tax consequences assuming the activity is not considered to be a hobby.

b. assuming the activity is treated as a hobby, what are the tax consequences?

c. Assuming the activity is deemed a hobby and property taxes are $4,000, what are the tax consequences?