Individual Taxation - United States

Les has collected stamps in his spare time for years.

He purchased many of his stamps at a price much lower than current market value. Les recently lost his job as a carpenter.

Since his wife works full time, he decides to start an internet-based stamp store.

He sold $6,500 worth of stamps in 2020 and reported the following expenses:

Supplies $ 2,000

Equipment rental 1,500

Web assistance 2,500

Office rental 750

Advertising 700

AGI without considering the effect of the stamp operation income or expenses is $100,000.

What is the effect of the income and expenses described above on AGI and itemized deductions (if any) if the business is classified as a:

1. Hobby?
2. Business?

ALSO,

Les insists that this is a business, not a hobby.

Research this issue. Provide support for your conclusion as to whether it is a business or hobby.

Cite and print the first page of at least one code section from THOMSON CHECKPOINT,

and at least one other authoritative source (i.e. Regulation, Rev. Rul), etc.