TAX QUESTION

Bob is single and has salary from his job as a sports announcer in the amount of $100,000.

He has charitable contributions in the amount of $1,000.

Bob also has the following income and expenses related to an activity:

Income	$20,000
Mortgage interest	5,000
Property taxes	5,000
Depreciation	4,000
Supplies and fees	7,000
Telephone	3,000

1.Briefly define an activity classified as a hobby vs. a business?

2.List 4 factors might be used to assist a taxpayer in determining whether an activity is a hobby or a business?

Using the tax formula, beginning with Gross Income, calculate Bob's taxable income if the activity is considered a hobby.

Are hobby expenses deductions FOR AGI or FROM AGI?

What form/schedule is hobby income reported on?

What form/schedule are hobby expenses reported on?

Using the tax formula, beginning with Gross Income, calculate Bob's taxable income if the activity is considered a business.

Are business expense deductions FOR AGI or FROM AGI?

What form/schedule is business income reported on?

What form/schedule are business expenses reported on?

Your answers to questions 3 and 4 above must include your calculation and a brief explanation of any applicable rules, limitations, etc. Also incorporate your answers on the tax forms as well.