Brenda, employed full time, makes beaded jewelry as a hobby. In Year 2, Brenda's hobby generated $2,000 of sales, and she incurred $3,000 of travel expenses. What is the proper reporting of the income and expenses related to the activity?
a) Sales and expenses are netted, and the net loss of $1,000 is reported as an itemized deduction not subject to the 2% limitation.
b) Sales of $2,000 are reported in gross income, and $3,000 of expenses are reported as an itemized deduction subject to the 2% limitation.
c) Sales of $2,000 are reported in gross income, and $2,000 of expenses are reported as an itemized deduction subject to the 2% limitation.
d) Sales and expenses are netted and deducted for AGI.
Ans: c) Sales of $2,000 are reported in gross income, and $2,000 of expenses are reported as an itemized deduction subject to the 2% limitation.
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