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:

Mario's Expenses

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.