Hobby Losses (LO 3.12)Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses:Sales$ 5,000Depreciation on greenhouse10,000Fertilizer, soil, pots1,500If an amount is zero, enter "0". b. If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity?$fill in the blank 9a0cfdf68fac035_1 c. If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted?$fill in the blank 12b81b026feafdb_1

Question b. Solutions:- Calculation of the amount of Lew's losses from the activity. Sales $5,000 Less: Depreciation on greenhouse $(10,000) Fertilizer, Soil, Pots $(1,500) Lew's loss from the activity $(6,500) Hence, The amount of Lew's loss from the activity is $(6,500) if the activity is deemed to be a regular business.Question c. Solutions:- Calculation of the amount of Lew's expenses (if any) from the activity that may be deducted. The Loss is Limited to the Amount of Income from the hobby. So, if the total income is more than the expense then the itemized deduction is subject to a maximum of 2% of AGI. Hence, the expenses couldn't be deducted from the activity.

Answered: If the activity is deemed to be a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Hobby Losses (LO 3.12)

Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses:

Sales $ 5,000

Depreciation on greenhouse 10,000

Fertilizer, soil, pots 1,500

If an amount is zero, enter "0".

b. If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity?
$fill in the blank 9a0cfdf68fac035_1

c. If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted?
$fill in the blank 12b81b026feafdb_1

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