Logan owns a horse ranch. Logan dislikes horses, but he opened the ranch because he

heard it was a lucrative business and he wanted to make money. Logans horse ranch has

lost money every year for the past 5 years (including this year), but Logan has made

some changes to business operations, including hiring a consultant and increasing his

prices. Logan anticipates that as a result of these changes, his horse ranch will generate

a profit in the next year or two.

This year, Logan hired his brother, Luke, to work at the horse ranch. Logan pays Luke

$500/hr to clean the horse stalls. Logan also hired his best friend, Lucy, to do Logans

grocery shopping and other personal errands. He pays Lucy $15/hr.

Which of the following is most accurate?

1

a-) Logan cannot deduct any of the costs associated with the horse ranch because the horse ranch

would be classified as a hobby, not a business

b-) Logan can deduct the full salary paid to Luke because Luke works in Logans horse ranch

business

c-) Logan can deduct the full salary paid to Lucy because the amount of the expense is reasonable

d-) Logan can deduct the full salary paid to Lucy because grocery shopping is ordinary and

necessary

e-) None of the above are correct