Juanita Knits Blankets as a Hobby and Sells Them

question 76

Multiple Choice

Juanita knits blankets as a hobby and sells them.In the current year,she earns $5,000 from her blanket sales and incurs expenses of $600.Juanita does not itemize deductions.On her tax return,she should

• A)report $5,000 of hobby income and deduct $600 of hobby expenses from AGI.
• B)report $5,000 of hobby income and deduct $600 of hobby expenses for AGI.
• C)report $5,000 of hobby income and deduct nothing from AGI since Juanita does not itemize deductions.
• D)report no hobby income and no hobby deductions.

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Definitions:

Compounded Monthly

A method where the interest earned on an investment is calculated and added to the principal every month.

Equal Payments

Regular payments of the same amount over a specified period, often used in loan repayment plans.

Compounded Quarterly

Interest calculation on the initial amount plus any accumulated interest four times a year.

Equal Payments

Regularly scheduled payments that are the same amount over a given period, commonly used in loans and mortgages.