Reference no: EM132995157
Question - Leno pursued a hobby of knitting mittens in his spare time. His AGI before considering the hobby is $38,000. During the year he sold the mittens for $9,000. He incurred expenses as follows:
Supplies $3,000
Interest on loan to get business started 600
Advertising 5,200
Assuming that the activity is deemed a hobby, how should Leno report these items on his tax return?
Include $9,000 in income and deduct $8,800 for AGI.
Ignore both income and expenses since hobby losses are disallowed.
Include $9,000 in income and deduct nothing.
Include $9,000 in income, deduct nothing for AGI, and claim $8,800 of the expenses as itemized deductions.
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