QUESTION 2 Aro pursued a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is $40,000. During 2020 she sold the bedspreads for $9,000. She incurred expenses as follows: $4,000 Supplies 500 Interest on loan to get business started 6,500 Advertising Assuming that the activity is deemed a hobby, how should she report these items on her tax retur? a. Include $9,000 in income and deduct nothing. b. Ignore both income and expenses since hobby losses are disallowed. Oc Include $10,000 in income, deduct nothing for AGI, and claim $11,000 of the expenses as itemized deductions. d. Include $10,000 in income and deduct nothing, e. None of the above. QUESTION 1 Linda, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida and wants to expand to other states. During 2020, she spends $14,00 to investigate TV rental steres in South Carolina and $10,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations but not the outlets Georgis. As to these expenses, Linda should: a. Capitalize $14,000 and not deduct $9,000. b. Expense $23,000 for 2020. OcExpense $10,000 for 2020 and capitalize $14,000. d. Expense $24,000 for 2020. e. None of the above