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Kelsey Enjoys Making Cupcakes as a Hobby and Occasionally Sells

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Kelsey enjoys making cupcakes as a hobby and occasionally sells them for parties.Kelsey receives $1,000 in revenues from cupcake sales this year and pays $1,300 for supplies.Kelsey takes the standard deduction each year.The net effect of the cupcake activity on Kelsey's taxable income is


Definitions:

Market Values

The current price at which an asset or service can be bought or sold in a competitive marketplace.

Unrealized Increase/Decrease

Refers to the change in value of an investment that has not been sold, affecting the company’s balance sheet but not its income statement.

Trading Securities

Financial instruments that are purchased by a company not for long-term investment but rather with the intention to trade in the short term for profit.

Unrealized Holding

Gains or losses on investments that a company has not sold yet and hence are not recorded in the financial statements.

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