25 May Question 1. Agnes operates a Christmas Shop in Atlantic City, N
Question
1. Agnes operates a Christmas Shop in Atlantic City, NJ. She makes a weekend trip to Vero Beach, FL, for the purpose of determining the feasibility of opening another shop. Her travel expenses are $2,000 (includes $500 for meals). In addition, she pays $5,000 to a market research firm in Vero Beach to prepare a feasibility study. Determine the amount of the expenses that Agnes can deduct if:
a. She opens a new shop in Vero Beach.
b. She decides notto open a new shop in Vero Beach.
a. .
b. Same response as in a.
2. While she was a college student, Angel lived by a bookstore located near campus. She thinks a bookstore located on the other side of campus would be successful. She incurs expenses of $42,800 (legal fees, accounting fees, marketing survey, etc.) in exploring its business potential. Her parents have agreed to loan her the money required to start the business. What amount of these investigation costs can Angel deduct if:
a. She opens the bookstore on August 1, 2014.
b. She decides not to open the bookstore.
3. Calculate the net income includible in taxable income for the following hobby:
| Income | $23,000 |
| Mortgage interest and property taxes allocable to hobby | 12,000 |
| Depreciation | 4,000 |
| Supplies and fees | 7,000 |
4. During the year, Rita rented her vacation home for twelve days for $2,400 and she used it personally for three months. The following expenses were incurred on the home:
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