Mr. Monk is a self-employed computer consultant who earns more than $100,000 each year. He also is an enthusiastic artist. This year, he spent $4,900 on oil paints, canvasses, supplies, and lessons at a local studio. Mr. Monk made several trips to the National Gallery in Washington, D.C., to attend lectures on painting technique. His total travel costs were $3,350.

a. Compute the effect on Mr. Monks AGI and taxable income of his painting revenue and expenses assuming Mr. Monk earned $13,290 from sales of his paintings. This was the sixth consecutive year that the painting activity generated a profit.

b. Compute the effect on Mr. Monks AGI and taxable income of his painting revenue and expenses assuming Mr. Monk earned $2,000 from sales of his paintings. The painting activity has never generated a profit. (Ignore any effect of 2% AGI limitation on miscellaneous itemized deductions.)

c. Compute the effect on Mr. Monks AGI and taxable income of his painting revenue and expenses assuming Mr. Monk earned $2,000 from sales of his paintings. The painting activity also generated a net loss four years ago but was profitable in each of the past three years.