1. Katie operates a ceramics studio from her garage. She incurs the following expenses:

Clay and paints $3,500

Painting technique seminars 400

Pottery wheel 75

Utilities for the ceramic studio 375

Personal property taxes on ceramic equipment 50

Katie's gross receipts from her business were $2,000.

a. If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.

b. If the studio isnota hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.

2. Candace uses an office in her home exclusively for her business.The business use of the home is 100 sq ft out of 2,000 sq ft for the entire home. The total expenses to allocate are $3,000.Candace wishes to maximize her deduction in 2016.What is the amount of her home office deduction before any income limitations?

3.What is the purpose of Schedule C?