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PeeDee's wife is a teacher. She makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. Which of the following statement is true? as a business. O Because her primary source of income is from her teaching job, she cannot treat the quilting activity as a Because her quilting activity resulted in a loss, she cannot treat it as a business. O If the IRS determines that her quilting activity is a hobby instead of a business, she cannot deduct her $3,300 expenses. If facts and circumstances support her claim that the quilting activity is a business, she can deduct her $3,300 as an itemized deduction.

PeeDee's wife is a teacher. She makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. Which of the following statement is true? as a business. O Because her primary source of income is from her teaching job, she cannot treat the quilting activity as a Because her quilting activity resulted in a loss, she cannot treat it as a business. O If the IRS determines that her quilting activity is a hobby instead of a business, she cannot deduct her $3,300 expenses. If facts and circumstances support her claim that the quilting activity is a business, she can deduct her $3,300 as an itemized deduction.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PeeDee's wife is a teacher. She makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. Which of the following statement is true? O Because her primary source of income is from her teaching job, she cannot treat the quilting activity as a business. Because her quilting activity resulted in a loss, she cannot treat it as a business. O If the IRS determines that her quilting activity is a hobby instead of a business, she cannot deduct her $3,300 expenses. If facts and circumstances support her claim that the quilting activity is a business, she can deduct her $3,300 as an itemized deduction.
Transcribed Image Text:PeeDee's wife is a teacher. She makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. Which of the following statement is true? O Because her primary source of income is from her teaching job, she cannot treat the quilting activity as a business. Because her quilting activity resulted in a loss, she cannot treat it as a business. O If the IRS determines that her quilting activity is a hobby instead of a business, she cannot deduct her $3,300 expenses. If facts and circumstances support her claim that the quilting activity is a business, she can deduct her $3,300 as an itemized deduction.
PeeDee needs your help to determine which of the following statement is false: O PeeDee paid his physician $6,200 for routine examinations and lab tests and received a $3,000 reimbursement from his medical insurance company. PeeDee is allowed to deduct the $3,200 unreimbursed medical expense as an above-the-line deduction. For federal income tax purposes, a taxpayer may deduct state and local income taxes ($10,000 maximum) as itemized deductions. O In the current year, PeeDee's wife took out a $30,000 student loan to pursue a master degree. They may deduct the annual interest payment as an above-the-line deduction. O Damage to a personal residence caused by a hurricane that is a federally declared disaster is an example of a casualty loss.
Transcribed Image Text:PeeDee needs your help to determine which of the following statement is false: O PeeDee paid his physician $6,200 for routine examinations and lab tests and received a $3,000 reimbursement from his medical insurance company. PeeDee is allowed to deduct the $3,200 unreimbursed medical expense as an above-the-line deduction. For federal income tax purposes, a taxpayer may deduct state and local income taxes ($10,000 maximum) as itemized deductions. O In the current year, PeeDee's wife took out a $30,000 student loan to pursue a master degree. They may deduct the annual interest payment as an above-the-line deduction. O Damage to a personal residence caused by a hurricane that is a federally declared disaster is an example of a casualty loss.
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