Priscella Pursued a Hobby of Making Bedspreads in Her Spare

question 12

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 $10,000 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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Definitions:

Zone of Tolerance

The range within which customers are willing to accept variations in service or product quality.

Bug-Infested Room

A room heavily infested with insects, which could refer to a detrimental environmental condition needing pest control measures.

Hotel Guest

An individual who rents a room or accommodation in a hotel for a temporary stay.

Distributive Fairness

The perceived fairness of the outcomes received, such as goods or services, in transactions or interactions between parties.