33. This question will test your ability to research a tax issue and reach a conclusion. Sara is an accountant. As a hobby, Sara creates and sells oil paintings. In 2021, her sales total $8,000 and her expenses related to the sales total $5,000. Assuming her hobby is NOT considered a trade or business for federal tax purposes, and that all of her hobby expenses would be considered miscellaneous itemized deductions, how should she treat the income and expenses? Hint: Make sure you review the rules for 2018 2025 related to hobby expenses.

a. Sara must include the $8,000 in income but is allowed an offsetting deduction of $5,000.

b. Sara must include the $8,000 in income but is NOT allowed an offsetting deduction of $5,000.

c. Sara does not have to report any income or expenses related to a hobby.

34. Refer to #33 above. Which of the following sources cover this topic?

a. FTC paragraph A-2729.

b. Reg. Section 1.67-1T(a)(1)(iv).

c. IRC 170.

d. Both a and b.

e. a, b, and c.

f. None of the above.