expenses u as follows Supplies 8200 Interest on loan to get

expenses u as follows: Supplies $8,200 Interest on loan to get business started $2,850 Advertising $575 rupoming that the setivty is demed a hoby and Cindy takes the standard deduction, how sthould sthe report these items on her tax return? a. Include $11,500 in income and deduct $11,625 for AGI b. Ignore both income and expenses since hobby losses are disallowed. CInclude $11,500 in income and deduct none of the expenses since hobby expenses must be itemized d. Include $11,500 in income and deduct interest of $2,850 for AGI e. None of the above Abigail, a calendar year cash basis taxpayer, owns and operates several fast food restaurants in New Mexico, and wants to expand to other states. During 2017, she spends $25,000 to investigate several restaurants in Arizona and $27,000 to investigate fresh food markets in New Mexico. She acquires the Arizona operations, but not the fresh food markets in New Mexico. As to these expenses, Abigail should: 5. a. Expense $25,000 and not deduct $27,000 related to the fresh food markets. b. Expense $27,000 for 2013. c. Expense $3,000 for 2013 and capitalize $49,000 and amortize. d. Expense $52,000. e. None of the above. Edward has a brokerage account and buys investments on margin which results in interest charges of $20,000 during the year. Income generated in the brokerage account was as follows: 6. Municipal Bond Interest Taxable interest $ 12,000 $ 68,000 How much investment interest can Edward deduct? a. $o $3,000 12,000 d. $17,000 e. $20,000 Page 2 of 11

Solution

5. As of these expenses ,Abigail should , Expense $52,000 , as beacuse both the expenses related to investgating the market related to restaurent industry.