Alice is a high school teacher who enjoys knitting. She knits scarves and sweaters and sells them in a local boutique. Alice spends 10 to 15 hours a week knitting the scarves and sweaters. Alice had sales of $6,000 and expenses of $10,000 related to knitting and selling the goods. Alice's $10,000 of expenses consisted of $800 of interest expense and $1,600 in property taxes for her building and tools, $3,000 in supplies, and $4,600 in depreciation charges. How would Alice's income and expenses be reported on her tax return if her knitting activity is characterized as a hobby in 2019?

Alice is a high school teacher who enjoys knitting. She knits scarves and sweaters and sells them in a local boutique. Alice spends 10 to 15 hours a week knitting the scarves and sweaters. Alice had sales of $6,000 and expenses of $10,000 related to knitting and selling the goods. Alice's $10,000 of expenses consisted of $800 of interest expense and $1,600 in property taxes for her building and tools, $3,000 in supplies, and $4,600 in depreciation charges. How would Alice's income and expenses be reported on her tax return if her knitting activity is characterized as a hobby in 2019?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 37P

See similar textbooks

Similar questions

Natalia makes colorful beaded necklaces and sells them at a local farmer's market. Natalia currently sells her necklaces for $40 each. She spends approximately $18 on the materials (beads, wire, and clasp) and $2 on packaging for each necklace. She pays annual fixed costs of $4,180 ($3,500 for space at the farmer's market, $180 for licenses and permits, and $500 annual depreciation on tent, display cases, and signage). a) How many necklaces does Natalia need to sell in 2021 to break even? necklaces b) How many necklaces does Natalia need to sell in 2021 to earn a profit of $25,000? necklaces c) Natalia's best guess is that she will sell 1,500 necklaces in 2021. If she's correct, what is Natalia's expected 2021 profit? d) Natalia estimates that if she reduces her selling price by 15% in 2021, she will sell 20% more necklaces. What is Natalia's expected profit if she reduces her selling price by 15%? Natalia estimates that if she instead increases her selling price by 15% in 2021, she…
Sue is a small business owner who often gives gifts to clients. She gives a $40 gift to her client, Mr. Smith, and his wife. Sue spent $6 to wrap the gift. She also gave out 400 calendars with her company name on them. Each calendar cost $1. Sue also gave her secretary a $370 watch for his 10 years of service. How much of the above expenses may she duduct?
Catrina recently graduated from college with a degree in political science. She started a job that pays her $48,000 per year. Her monthly net income is $2,800. She’s moving into her own one-bedroom apartment. She has a car that she makes payments on and she pays for car insurance. She also adopted a cat, so she now has to pay for cat food and vet bills. Catrina has budgeted for the following monthly expenses based on what she expects to spend: Using the information about Catrina's proposed monthly budget above, answer the following questions. Is Catrina budget balanced? If not, what can Catrina do to balance her budget? Is Catrina following the 50, 30 and 20 spending plan in terms of savings? Explain. If Catrina decides to increase savings where would you suggest that she decrease her spending?
This year Evan graduated from college and took a job as a deliveryman in the city. Evan was paid a salary of $78,300 and he received $700 in hourly pay for part-time work over the weekends. Evan summarized his expenses as follows: Cost of moving his possessions to the city (125 miles away) Interest paid on accumulated student loans Cost of purchasing a delivery uniform Contribution to State University deliveryman program $1,200 3,000 1,600 1,400 Calculate Evan's AGI and taxable income if he files single. Assume that interest payments were initially required on Evan's student loans this year. Evan's AGI Taxable income
Kim is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Kim is living at home and works in a shoe store, earning a gross income of $970 per month. Her employer deducts $221 for taxes from her monthly pay. Kim also pays $98 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $109 per month. Help Kim make her decision by calculating her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.) Debt Payments-to-Income Ratio Ratio with college loan Ratio without college loan
Felice bought a duplex apartment at a cost of $205,000. Her mortgage payments on the property are $1,340 per month, $666 of which can be deducted from her income taxes. Her real estate taxes total $1,860 per year, and insurance costs $1,476 per year. She estimates that she will spend $1,074 each year per apartment for maintenance, replacing appliances, and other costs. The tenants will pay for all utilities. What monthly rent must she charge for each apartment to break even?
Chelsea Menken, of Providence, Rhode Island, recently graduated with a degree in food science and now works for a major consumer foods company earning $70,000 per year with about $57,600 in take-home pay. She rents an apartment for $1,200 per month. While in school, she accumulated about $37,000 in student loan debt on which she pays $385 per month. During her last fall semester in school, she had an internship in a city about 100 miles from her campus. She used her credit card for her extra expenses and has a current debt on the account of $8,000. She has been making the minimum payments on the account of about $240 a month. She has assets of $14,000. 1. Calculate Chelsea’s debt payments-to-disposable income ratio. Round your answer to two decimal places.
Charlene, a chemist, worked in a chemistry lab and earned $60,000 per year. Charlene quit in order to start her own business. To buy the necessary equipment, she withdrew $50,000 from her savings, (which paid two percent interest per year) and borrowed $60,000 from her Aunt Bea, whom she pays five percent interest per year. Last year she paid $48,000 for ingredients and paid all of the interest on the loan from her aunt. She had revenue of $124,000. For last year, Alvin, the accountant, says Charlene’s profit is ________ and Emily the economist, says Charlene’s profit is ________. $76,000; $12,000 $73,000; $14,000 $73,000; $12,000. $73,000; $13,000. $72,000; $13,000.
Billy is employed a construction worker. During the current income year, he incurs the following work-related expenses: 6 plain cotton shirts @ $50 each $300 5 pairs of plain cotton trousers @$80 each $400 2 Hi-vis safety vests @ $40 each $80 1 Hard hat $60 1 pair of steel-capped safety boots $160 10 pairs of thick woollen socks @ $15 each $150 Based on the above information, what is the value of Billy’s TOTAL DEDUCTION ENTITLEMENT for his work-related expenses in the current income year? [A] $160 [B] $220 [C] $240 [D] $300 [E] $1,000
S Felice bought a duplex apartment at a cost of $210,000. Her mortgage payments on the property are $1.420 per month, $648 of which can be deducted from her income taxes. Her real estate taxes total $1,740 per year, and insurance costs $1,044 per year. She estimates that she will spend $1,092 each year per apartment for maintenance, replacing appliances, and other costs. The tenants will pay for all utilities. What monthly rent must she charge for each apartment to break even? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Ignore any tax effects. Rent per apartment to break even
Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to chiropractic school. Right now Madeline is living at home and works in a shoe store, earning a gross income of $1,140 per month. Her employer deducts a total of $260 for taxes from her monthly pay. Madeline also pays $160 on several credit card debts each month. The loan she needs for chiropractic school will cost an additional $260 per month. Calculate her debt payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (Enter your answers as a percent rounded to 2 decimal places.) Debt Payments-to-Income Ratio With college loan % Without college loan %. Pls show steps complete.
Shanice owns a food delivery business. She picks up meals from restaurants and delivers them to his clients' homes. One year Shanice's revenue is $25,000 and her costs (such as gas and maintenance on her car) is $10,000. If Shanice did not run this business, she could get a job at a grocery store and make $15,000 that year. Which of the following statements is true? Shanice's accounting profit is $15,000. Shanice's economic profit is $0. Shanice's accounting profit is $10,000. Shanice's economic profit is $20,000. Shanice's accounting profit is $0. Shanice's economic profit is $15,000. OShanice's accounting profit is $20,000. Shanice's economic profit is $10,000.