Sandra, an orthodontist, is single and has net earnings of $90,000 from her practice. In addition, she collects antique books that she buys and sells at antique shows. She participates in six to eight weekend shows per year. Her income and expenses for the current year are as follows:
|
Revenue from sale of antique books |
$22,000 |
|
Expenses |
|
|
Cost of goods sold |
12,000 |
|
Show registration costs |
3,000 |
|
Advertising |
1,000 |
|
Dealer’s license—annual fee |
500 |
|
Insurance |
900 |
|
Depreciation of display cases |
1,200 |
Sandra has no other items that would affect her AGI. Itemized deductions consisting of taxes, interest, and charitable contributions are $19,000. Calculate Sandra’s taxable income if the antique book activity is classified as:
a. A hobby.
b. A business.