Kana is a CPA who loves chinchillas. She breeds chinchillas as pets (she current

Question

Kana is a CPA who loves chinchillas. She breeds chinchillas as pets (she currently owns thirteen of them) and every so often sells a baby chinchilla to a suitable family to keep as a pet.

In the current year, she sells $250 worth of chinchillas and incurs the following expenses:

Chinchilla breeding cages $300

Advertising for chinchilla sales $2,500

This activity is considered a hobby.

Kana has adjusted gross income of $72,000. What is the amount of income and expense Kana recognizes (assume she itemizes deductions) associated with her chinchilla hobby if the current year is 2017?

2017 Income amount is :

2017 deduction amount is:

Explanation / Answer

Gross Income:/ Adjusted Gross Income $72,000.00 Miscellaneous itemized deductions/hobby: Hobby Income = (13 x 250) $3,250.00 Less: expenses = (300 +2500) $2,800.00 $450.00 $72,450.00 2017 Income amount is : $450.00 2017 deduction amount is: $2,800.00 Limits on Hobby Expenses. Generally, we can only deduct our hobby expenses up to the amount of hobby income. If our hobby expenses are more than our hobby income, we have a loss from the activity. we can’t deduct the loss from your other income.

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