Kelsey enjoys making cupcakes as a hobby and occasionally sells them for parties.Kelsey receives $1,000 in revenues from cupcake sales this year and pays $1,300 for supplies.Kelsey takes the standard deduction each year.The net effect of the cupcake activity on Kelsey's taxable income is
A)$0.
B)an increase of $1,000.
C)a decrease of $300.
D)a decrease of $280.

Question

Quizplus · Accepted Answer

B)Hobby expenses,limited to hobby revenue,are itemized deductions.Kelsey takes the standard deduction so her taxable income will include the full $1,000 revenue,but the hobby expenses will not be deducted at all.

Kelsey Enjoys Making Cupcakes as a Hobby and Occasionally Sells