Sharon is single and a data-processing manager for the phone company. She also owns and operates a sports memorabilia store. Sharon goes to shows, subscribes to numerous magazines on sports memorabilia, and maintains a Web page on the Internet. She has been engaged in the activity for the last 5 years. During that time, she reported a net loss in two of the years and net income in the other three. Overall, her sports memorabilia activity has shown a slight loss, but the value of her collection over the 5 years has increased by 20%. Sharon rents a 600-square-foot storefront for $500 a month. Although the store is open only on Saturdays, she is usually in her office at the store 2 or 3 nights a week buying and selling sports memorabilia on the Internet. For the current year, she has an adjusted gross income of $42,000 before considering the following income and expenses related to her sports memorabilia activity:

Sale of memorabilia	$11,500
Cost of items sold	3,725
Cost of new memorabilia acquired	1,500
Registration and booth fees	750
Transportation to memorabilia shows	600
Meals attending shows	250
Cost of magazines	280
Cost of Internet connection	240
Office utilities	800
Phone	400
Depreciation on computer	200

a. If Sharon is engaged in a trade or business, she is allowed to deduct all ordinary, necessary and reasonable expenses in determining her business income. Her loss from the sports memorabilia activity is $fill in the blank 594985f4cfe8018_3.

The hobby rules apply when a taxpayer has income and expenses in an activity without a predominant profit motive.

b. If Sharon is engaged in a hobby, she must include the $fill in the blank ec4e7702b04afa7_1 in gross income. Sharon is not allowed to deduct any of the hobby expenses.

Limited Mixed-Use Expenses (LO. 7) Sharon is single and a data-processing manager for the phone company. She also owns and operates a sports memorabilia store. Sharon goes to shows, subscribes to numerous magazines on sports memorabilia, and maintains a Web page on the Internet. She has been engaged in the activity for the last 5 years. During that time, she reported a net loss in two of the years and net income in the other three. Overall, her sports memorabilia activity has shown a slight loss, but the value of her collection over the 5 years has increased by 20%. Sharon rents a 600-square-foot storefront for $500 a month. Although the store is open only on Saturdays, she is usually in her office at the store 2 or 3 nights a week buying and selling sports memorabilia on the Internet. For the current year, she has an adjusted gross income of $42,000 before considering the following income and expenses related to her sports memorabilia activity: Sale of memorabilia $11,500 Cost of items sold 3,725 Cost of new memorabilia acquired 1,500 Registration and booth fees 750 Transportation to memorabilia shows 600 Meals attending shows 250 Cost of magazines 280 Cost of Internet connection 240 Office utilities 800 Phone 400 Depreciation on computer 200 a. If Sharon is engaged in a trade or business, she is allowed to deduct all ordinary, necessary and reasonable expenses in determining her business income. Her loss from the sports memorabilia activity is $ -1,610 x. Feedback b. If Sharon is engaged in a hobby, she must include the $ 10,430 x in gross income. Sharon is not allowed to deduct any of the hobby expenses. Feedback c. The tax law considers nine factors in determining whether an activity that earns income is profit-motivated and should be treated as a business or is subject to the hobby rules. Determine if each item listed is one of those nine factors. Select "Yes" or "No" whichever is applicable. Whether the taxpayer carries on the activity in a business-like manner. Yes The time and effort spent on the activity. Yes The money spent on the activity. No Taxpayer's history of income or profit in the activity. Yes The history of losses. No The taxpayer's success in similar activities. Yes The taxpayer's success in different activities. No Limited Mixed-Use Expenses (LO. 7) Sharon is single and a data-processing manager for the phone company. She also owns and operates a sports memorabilia store. Sharon goes to shows, subscribes to numerous magazines on sports memorabilia, and maintains a Web page on the Internet. She has been engaged in the activity for the last 5 years. During that time, she reported a net loss in two of the years and net income in the other three. Overall, her sports memorabilia activity has shown a slight loss, but the value of her collection over the 5 years has increased by 20%. Sharon rents a 600-square-foot storefront for $500 a month. Although the store is open only on Saturdays, she is usually in her office at the store 2 or 3 nights a week buying and selling sports memorabilia on the Internet. For the current year, she has an adjusted gross income of $42,000 before considering the following income and expenses related to her sports memorabilia activity: Sale of memorabilia $11,500 Cost of items sold 3,725 Cost of new memorabilia acquired 1,500 Registration and booth fees 750 Transportation to memorabilia shows 600 Meals attending shows 250 Cost of magazines 280 Cost of Internet connection 240 Office utilities 800 Phone 400 Depreciation on computer 200 a. If Sharon is engaged in a trade or business, she is allowed to deduct all ordinary, necessary and reasonable expenses in determining her business income. Her loss from the sports memorabilia activity is $ -1,610 x. Feedback b. If Sharon is engaged in a hobby, she must include the $ 10,430 x in gross income. Sharon is not allowed to deduct any of the hobby expenses. Feedback c. The tax law considers nine factors in determining whether an activity that earns income is profit-motivated and should be treated as a business or is subject to the hobby rules. Determine if each item listed is one of those nine factors. Select "Yes" or "No" whichever is applicable. Whether the taxpayer carries on the activity in a business-like manner. Yes The time and effort spent on the activity. Yes The money spent on the activity. No Taxpayer's history of income or profit in the activity. Yes The history of losses. No The taxpayer's success in similar activities. Yes The taxpayer's success in different activities. No