Question

mari conducts a business with the following results in 2019: evenue epreciation on car Operating expenses of car $20,000 3,960 3,100 Rent 6,000 8,200 Wages Amortization of intangibles 680 Jamari estimates that due to a depressed real estate market, the value of land owned by the business declined by $5,200. a. Calculate the effect of Jamari's business on his AGI. Jamari's business has a net loss of $ 1,940 which is reported for AGI o n his tax return b. How would your answer in part (a) change if the activity was a hobby? If the activity was a hobby, Jamari will reports as income. Of his expenses, $ return are deductible on his tax

Answer 1

	Answer
a)	Particulars	Amount	Amount
	Revenue		$        20,000
	Less:
	Depreciation on Car	$         3,960
	Operating Exp of car	$         3,100
	Rent	$         6,000
	Wages	$         8,200
	Amortization of intangible	$            680	$        21,940
	Net Income / (loss)		$        -1,940
	Net loss 0f $ 1940 will be reported as a deduction for AGI from his tax return
b)	If the activity was a hobby, then Jamari will be able to deduct the expenses only till the extent of revenue earned from the hobby.
	Therefore, Jamari can deduct Maximum of $20,000 as expenses.

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