Katie operates a ceramics studio from her garage. She incurs the following expenses:   Clay and paint supplies $3,500 Painting technique seminars 400 Pottery wheel 75 Utilities for the ceramic studio 375 Advertising 50 Katie’s gross receipts from her business were $2,000. a. If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.     b. If the studio is not a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.

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