Burkett – Tax I – Chapter 5 1Hobby Deductions – 3 Tier (Ex. 38, p. 5.24-25)B is a physician with a $100K AGI. She has a farm as a hobby and generates gross income of $18,000 Expenses for current year are: Property taxes $ 6,000 Labor, feed & vet bills 10,000 Depreciation 4,00020,000Net Income <$2,000> Amount & type of deductions?Net DeductionGross income $ 18,000 Deductions: Tier 1: Business expense or itemized deduction Tier 2: Business expense if not hobby Tier 3: Depreciation expense Carryover of limited deductions?
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