Tax Homework Need Help Today
Harold conducts a business with the following results for the year:
Revenue $20,000
Depreciation on car 3,960
Operating expenses of car 3,100
Rent 6,000
Wages 8,200
Amortization of intangibles 680
Harold estimates that due to a depressed real estate market, the value of land owned by the business declined by $5,200.
a. Calculate the effect of Harold’s business on his AGI.
b. How would your answer in part (a) change if the activity was a hobby?
My work: For gross income I added $20,600 + $6,000 + $8,200 and got $34,200. For deductible expenses I added the $3,960 + $3,100 + $680 and got $7,740 and got AGI of $26,460 but the business declining part bothers me, do I have to subtract $5,200 as well? And what about amortization can I subtract that?
b) For b I think that depreciation is limited to 300 and he cannot deduct the estimated business loss, I am not sure.
