Alex, who is single, conducts an activity this year that is classified as a hobby. The activity produces the following revenues and expenses.
Revenue ................................................... $18,000
Property taxes ............................................ 3,000
Materials and supplies .................................. 4,500
Utilities ................................................... 2,000
Advertising .............................................. 5,000
Insurance ................................................. 750
Depreciation .............................................. 4,000
Without regard to this activity, Alex's AGI is $42,000. Determine the amount of gross income that Alex must report, the amount of the expenses he is permitted to deduct, and his taxable income from the hobby.