Question

Jim, the vice president of an oil company, has AGI of $80,000 and itemized deductions, not including any listed above, of $5,000.. He decides to pursue painting in his spare time. During the current year, Jim incurs the following expenses:

During the current year, Jim incurs the following expenses:

Depreciation on materials                         (3,900)

Property taxes on Jim’s art space     (2,500)                                       

Supplies used                                                               (5,300)

During the year, Jim sold paintings for a total of $8,660.

If the activity is held to be a hobby, what would Jim taxable income be in 2017?

If the activity is a trade or business, what would Jim taxable income be in 2017?

Answer 1

Computation of Jim Taxable income be in 2017 ( If Actibvity is held to be Hobby)
	Amount	Amount
AGI		$80,000.00
Itemized Deduction		-$5,000.00
Income from Hobby
Sale Value of Painting	$8,660.00
Itemized deduction: Property Tax on At Space	-$2,500.00
Supplies Used	-$5,300.00
Deperciation on material ( 8660-2500-5300)	-$860.00	-
Taxable Income		$75,000.00
Computation of Jim Taxable income be in 2017 ( If Actibvity is held to be Business)
	Amount	Amount
AGI		$80,000.00
Itemized Deduction		-$5,000.00
Income from Painting Business
Sales Value of Painting	$8,660.00
Itemized deduction: Property Tax on At Space	-$2,500.00
Supplies Used	-$5,300.00
Deperciation on material	-$3,900.00	-$3,040.00
Taxable Income		$71,960.00