Katie operates a ceramics studio from her garage. She incurs the following expenses: Clay and paint supplies $3,500 Painting technique seminars 400 Pottery wheel 75 Utilities for the ceramic studio 375 Advertising 50 Katie’s gross receipts from her business were $2,000. a. If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return. b. If the studio is not a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.
Katie operates a ceramics studio from her garage. She incurs the following expenses: Clay and paint supplies $3,500 Painting technique seminars 400 Pottery wheel 75 Utilities for the ceramic studio 375 Advertising 50 Katie’s gross receipts from her business were $2,000. a. If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return. b. If the studio is not a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.
Chapter3: Business Income And Expenses
Section: Chapter Questions
Problem 21P: Cindy operates a computerized engineering drawing business from her home. Cindy maintains a home...
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Katie operates a ceramics studio from her garage. She incurs the following expenses:
|
Clay and paint supplies |
$3,500 |
|
Painting technique seminars |
400 |
|
Pottery wheel |
75 |
|
Utilities for the ceramic studio |
375 |
|
Advertising |
50 |
Katie’s gross receipts from her business were $2,000.
a. If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.
b. If the studio is not a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.
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