During 2018, Fred Reardon incurred the following expenditures in connection with his coin collecting activities: Travel expenses $10,000 Purchase of coins still held at end of year 11,000 Cost of coins sold during year 9,000 Total $30,000 Fred received $16,000 for the coins sold during the year. (a.) If Fred's coin collecting activities are considered to be a hobby for tax purposes, what related expenditures are deductible on his 2018 tax return? Show computations and explain in detail. (b.) If Fred's coin collecting activities are considered to be a trade or business for tax purposes, what related expenditures are deductible? Show computations and explain in detail.
During 2018, Fred Reardon incurred the following expenditures in connection with his coin collecting activities: Travel expenses $10,000 Purchase of coins still held at end of year 11,000 Cost of coins sold during year 9,000 Total $30,000 Fred received $16,000 for the coins sold during the year. (a.) If Fred's coin collecting activities are considered to be a hobby for tax purposes, what related expenditures are deductible on his 2018 tax return? Show computations and explain in detail. (b.) If Fred's coin collecting activities are considered to be a trade or business for tax purposes, what related expenditures are deductible? Show computations and explain in detail.
Chapter6: Deductions And Losses: In General
Section: Chapter Questions
Problem 11DQ
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Question
During 2018, Fred Reardon incurred the following expenditures in connection with his coin collecting activities:
|
Travel expenses |
$10,000 |
|
Purchase of coins still held at end of year |
11,000 |
|
Cost of coins sold during year |
9,000 |
|
Total |
$30,000 |
Fred received $16,000 for the coins sold during the year.
(a.) If Fred's coin collecting activities are considered to be a hobby for tax purposes, what related expenditures are deductible on his 2018 tax return? Show computations and explain in detail.
(b.) If Fred's coin collecting activities are considered to be a trade or business for tax purposes, what related expenditures are deductible? Show computations and explain in detail.
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