Reference no: EM131989167
Problem
TAX QUESTION
Bob is single and has salary from his job as a sports announcer in the amount of $100,000.
He has charitable contributions in the amount of $1,000.
Bob also has the following income and expenses related to an activity:
Income $20,000
Mortgage interest 5,000
Property taxes 5,000
Depreciation 4,000
Supplies and fees 7,000
Telephone 3,000
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?
Using the tax formula, beginning with Gross Income, calculate Bob's taxable income if the activity is considered a hobby.
Are hobby expenses deductions FOR AGI or FROM AGI?
What form/schedule is hobby income reported on?
What form/schedule are hobby expenses reported on?
Using the tax formula, beginning with Gross Income, calculate Bob's taxable income if the activity is considered a business.
Are business expense deductions FOR AGI or FROM AGI?
What form/schedule is business income reported on?
What form/schedule are business expenses reported on?
Your answers to questions 3 and 4 above must include your calculation and a brief explanation of any applicable rules, limitations, etc. Also incorporate your answers on the tax forms as well.
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