Question
Mario paints landscape portraits, and he treats the activity as a hobby. During the current year, Mario incurred the following expenses while earning $2,500 from
Mario paints landscape portraits, and he treats the activity as a hobby. During the current year, Mario incurred the following expenses while earning $2,500 from sales of paintings:
Paints and supplies | $2,200 |
---|---|
Utilities expenses for his studio | 1,000 |
Advertising | 300 |
Insurance on his studio and equipment | 700 |
Mario uses the standard deduction and never itemizes his deductions. How should Mario report all of the items related to his hobby on his tax return?
ans:
Report a $400 loss as a deduction for AGI.
Include $2,500 in gross income and deduct nothing.
Include $2,500 in gross income and deduct $2,500 for AGI.
Include $2,500 in gross income and deduct $1,700 for studio expenses.
Report no income and no deductions.
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