What is amount of interest income to be included in income

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1. Betty Brewster received the following interest payments.

  • Luggage gift for purchasing a 4-year certificate of deposit (fair-market value): $50
  • Interest on passbook savings account: $15
  • Interest on certificate of deposit: $200
  • Dividends on share account savings in credit union: $150
  • Interest on State of Mississippi bonds issued to finance state highway construction: $300

What is the amount of interest income to be included in income?

2.  Bob Smith, a professional basketball player, raises Black Angus cattle under circumstances that would indicate that the activity is a hobby. His adjusted gross income for the year is $80,000, and he has $1,000 of other miscellaneous itemized deductions, all of which are subject to the 2% floor. During the taxable year, the feed for the cattle costs $3,000. The income from the sale of cattle was $2,800.

(a) Under the hobby loss rule, to what extent is the expense of $3,000 deductible?

(b) Under the 2%-of-adjusted-gross-income limitation, how much is the overall deductible amount of his itemized deductions?

Reference no: EM131622573

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