Alex, who is single, conducts an activity 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 income Alex must report, the amount of the expenses he is permitted to deduct, and his taxable income.