Jenna Leigh Is Employed as a Receptionist for a CPA

question 48

Multiple Choice

Jenna Leigh is employed as a receptionist for a CPA firm,but on evenings and weekends,she bakes wedding cakes.In each of the past four years,Jenna's baking activity resulted in a net profit.This year,the activity generated a $720 net loss.Which of the following statements is true?

• A)The legal presumption is that Jenna's $720 loss is a business loss.
• B)The legal presumption is that Jenna's $720 loss is a nondeductible hobby loss.
• C)Jenna must include the revenues from her baking activity in gross income but can't deduct any of her related expenses.
• D)Jenna is allowed to report her $720 loss as a miscellaneous itemized deduction.

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Definitions:

Economic Profit

The difference between the revenue received from the sale of an output and the opportunity cost of the inputs used, often considered in terms of exceeding the company's normal profit level.

Entrepreneur's Talent

The unique set of skills, insights, and abilities that an entrepreneur possesses, contributing to their success in creating and running businesses.

Annual Revenue

The total amount of money earned by a business over a year from its sales or services.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues.