Priscella Pursued a Hobby of Making Bedspreads in Her Spare

question 117

Multiple Choice

Priscella pursued a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is $40,000. During the year she sold the bedspreads for $10,000. She incurred expenses as follows: ​
Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

• A)Include $10,000 in income and deduct $11,000 for AGI.
• B)Ignore both income and expenses since hobby losses are disallowed.
• C)Include $10,000 in income, deduct nothing for AGI, and claim $11,000 of the expenses as itemized deductions.
• D)Include $10,000 in income and deduct interest of $500 for AGI.
• E)None of the above.

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