Your favorite client, Mr. T, tells you that in 2019 he finally turned his longstanding meteorite hunting hobby (something he’s loved since he was a kid) into a “real business.” You ask a few due diligence questions and find out the following: Over the past few years Mr. T has found around 50 actual meteorites. He has sold only four of those, at prices ranging from $8,000 to $15,000; his other “finds” he’s kept even though there is a ready market for them. In addition to travel, Mr. T’s major outlays have been for high-tech metal detectors and etc. equipment – around $20,000 over the past few years. He does keep very careful books and records. To facilitate his “search time” he cut his hours at the plant (his “day job,” which he hates) during the nice-weather months and made up the time during the horrible-weather months; he has not and does not plan to quit, however, because he likes the medical insurance, group life insurance, and other benefits. Toward preparing his 2019 tax return, what is your analysis and conclusion as to whether Mr. T now has a “real business” vs. just a hobby?

Stated under tax laws, the intentions have a role to play to determine whether the business is for…

Answered: Your favorite client, Mr. T, tells you…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Your favorite client, Mr. T, tells you that in 2019 he finally turned his longstanding meteorite hunting hobby (something he’s loved since he was a kid) into a “real business.” You ask a few due diligence questions and find out the following:

Over the past few years Mr. T has found around 50 actual meteorites.

He has sold only four of those, at prices ranging from $8,000 to $15,000; his other “finds” he’s kept even though there is a ready market for them.

In addition to travel, Mr. T’s major outlays have been for high-tech metal detectors and etc. equipment – around $20,000 over the past few years.

He does keep very careful books and records.

To facilitate his “search time” he cut his hours at the plant (his “day job,” which he hates) during the nice-weather months and made up the time during the horrible-weather months; he has not and does not plan to quit, however, because he likes the medical insurance, group life insurance, and other benefits.

Toward preparing his 2019 tax return, what is your analysis and conclusion as to whether Mr. T now has a “real business” vs. just a hobby?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions