Matt is single, age 25 and has salary from his job as a sports announcer in the amount of $50,000. Matt also has the following income and expenses related to an activity:
Income- $23,000
Mortgage interest- from his home office- $8,000
Property taxes- from his home office- $2,000
Depreciation- $5,000
Supplies and fees- $8,000
Telephone- $2,000
1. Briefly define an activity classified as a hobby vs. a business?
2. List 4 factors might be used to assist a taxpayer in determining whether an activity is a hobby or a business?
3. If a hobby, answer the following questions:
a. Are hobby expenses deductions FOR AGI or FROM AGI?
b. What form/schedule and line is hobby income reported on?
c. What form/schedule and line are hobby expenses reported on?
d. Calculate Matt's AGI.
e. What is the rule regarding how hobby expenses are deducted, including the ordering of expenses and all limitations?
f. Apply the rule in (e) above and prepare a detailed schedule of your calculation of deductible hobby expenses are calculated.
4. If a business, answer the following questions:
a. Are business expense deductions FOR AGI or FROM AGI?
b. What form/schedule is business income reported on?
c. What form/schedule are business expenses reported on?
d. Prepare a tax return for Matt, assuming he uses the standard deduction and has no dependents.
Matt is single, age 25 and has salary from his job as a sports announcer in the amount of $50,000. Matt also has the following income and expenses related to an activity:
Income- $23,000
Mortgage interest- from his home office- $8,000
Property taxes- from his home office- $2,000
Depreciation- $5,000
Supplies and fees- $8,000
Telephone- $2,000
1. Briefly define an activity classified as a hobby vs. a business?
2. List 4 factors might be used to assist a taxpayer in determining whether an activity is a hobby or a business?
3. If a hobby, answer the following questions:
a. Are hobby expenses deductions FOR AGI or FROM AGI?
b. What form/schedule and line is hobby income reported on?
c. What form/schedule and line are hobby expenses reported on?
d. Calculate Matt's AGI.
e. What is the rule regarding how hobby expenses are deducted, including the ordering of expenses and all limitations?
f. Apply the rule in (e) above and prepare a detailed schedule of your calculation of deductible hobby expenses are calculated.
4. If a business, answer the following questions:
a. Are business expense deductions FOR AGI or FROM AGI?
b. What form/schedule is business income reported on?
c. What form/schedule are business expenses reported on?
d. Prepare a tax return for Matt, assuming he uses the standard deduction and has no dependents.
