Alex, who is single, conducts an activity in 2018 that is appropriately classifi

Question

Alex, who is single, conducts an activity in 2018 that is appropriately classified as a hobby. The activity produces the following revenues and expenses:

Revenue $18,000

Property taxes 3,000

Materials and supplies 4,500

Utilities 2,000

Advertising 5,000

Insurance 750

Depreciation 4,000

Without regard to this activity, Alex's AGI is $42,000. Determine the amount of Alex's taxable income assuming he has not other itemized deductions. The standard deduction for single taxpayers is $12,000. Taxable income: $_________

Explanation / Answer

Under new law hobby related expenses are not deductible but income is part of gross income.

Thus, AGI = 42000+18000 = 60000

Taxable income = 60000- 12000 (standard deduction) = 48000

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