Isabelle's Adjusted Gross Income $($AGI$)$ is $$155,000,$ which includes earnings from her collectible assets of $$7,300.$ She chooses to itemize her deductions when filing her taxes. Isabelle$$s expenses are as follows:

Investment interest paid on memorabilia $($net investment income is $$5,400)$ $$1,200$

Alabama income taxes paid $$1,800$

Entrance fees, booth registration fees, and travel expenses for trade shows $($for the purpose of selling the memorabilia$)$ paid $$2,400$

Office supplies purchased for use in the business $$1,600$

Depreciation for glass showcases $($used to store and show memorabilia$)$ $$800$

Answer the following questions:

$1)$ What expenses are deductible under Section $183$ of the IRS tax code?

$2)$ Did Isabelle incur a gain or loss on the sale of her memorabilia?

$3)$ What expenses are taxed under ordinary income and what expenses are taxed as a capital gain$/$loss$?$

$4)$ What is her after$-$tax cash flow assuming all her expenses are cash aside from the depreciation expense?

Answer rating: 100% (QA)

1 Expenses deductible under Section 183 of the IRS tax code also known as the hobby loss rule or act... View the full answer