2. This question is worth 15 points.
Matt is single and has salary from his job as a sports announcer in the amount of $100,000.
He has charitable contributions in the amount of $1,000.
Matt also has the following income and expenses related to an activity:
Income
Mortgage interest
Property taxes
Depreciation
Supplies and fees
Telephone
Briefly define an activity classified as a hobby vs. a business?
List 4 factors might be used to assist a taxpayer in determining whether an activity is a hobby or a
business?
Using the tax formula, beginning with Gross Income, calculate Matt's taxable income if the activity is
considered a hobby.
a. Are hobby expenses deductions FOR AGI or FROM AGI?
b. What form/schedule is hobby income reported on?
c. What form/schedule are hobby expenses reported on?
Using the tax formula, beginning with Gross Income, calculate Matt's taxable income if the activity is
considered a business.
a. Are business expense deductions FOR AGI or FROM AGI?
b. What form/schedule is business income reported on?
c. What form/schedule are business expenses reported on?
Your answers to questions 3 and 4 above must include your calculation and a brief explanation of any
applicable rules, limitations, etc. You can also incorporate your answers on the tax forms for a few bonus
points, but this is not required.