Which statement best describes the treatment of hobby expenses?

$1)$ Hobby expenses are allowed to be deducted in full from hobby income, but cannot create a loss.

$2)$ Allowed as an adjustment to income in Part II of Schedule $1($Form $1040)$ up to the amount of hobby income.

$3)$ Only cost of goods sold is allowed to be deducted from hobby gross receipts before reporting the hobby income.

$4)$ Only cost of goods sold is allowed as an adjustment to income in Part II of Schedule $1$$\mathrm{}\mathrm{}\mathrm{}\mathrm{}$ up to the amount of hobby income.

 

 

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct statement that describes th... View the full answer