Katie Operates a Ceramics Studio from Her Garage Katie's Gross Receipts from Her Business Were $2,000

Katie operates a ceramics studio from her garage.She incurs the following expenses: $\begin{array}{llcc} \text {Clay and paints } &\$3,500 \\ \text {Painting technique seminars } &400\\ \text {Pottery wheel } &75\\ \text {Utiliti es for the ceramic studio } &375\\ \text {Personal property taxes on ceramic equipment } &50\\\end{array}$
Katie's gross receipts from her business were $2,000.
a.If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.
b.If the studio is not a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.

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a.If the business is deemed to be a hobb...

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