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Question: Julia operates a small business selling baseball cards and memorabilia. As part of that business,...

Julia operates a small business selling baseball cards and memorabilia. As part of that business, Julia frequently sells signed baseballs. In order to get a signature from Mike Trout (a famous baseball player), Julia attends a game in her hometown. Prior to the game, Julia gets Mr. Trout’s autograph and then stays to watch the game. It cost Julia $100 to attend the game. For the year, Julia has the following additional items of income and expenses:

$65,000 gross income from sales of memorabilia

$20,000 of operating expenses and COGS (not including the $100 discussed above)

$6,000 of medical expenses

$4,000 of expenses related to real estate investments she is holding for appreciation

$3,500 of mortgage interest on her residence

Can Julia deduct the $100 cost of attending the baseball game? Why or why not? Please calculate (showing your work) Julia’s adjusted gross income and her taxable income for the year. Assume Julia itemizes her deductions. (Please do not copy other answers to this problem from Chegg, as they are incorrect.)

Solution

Yes ,Julia Should decduct $100 as this expense is part of her business She used to sell signed baseball and attending the basebal for sign of player is part of her business

Her Gross Income will be 65,000 aasgiven

& Net Income 65000-20000-100= 44900

Expense of $ 6000 Medical is personal in nature disallowed

Expense $4000 related to realestate Disallowed

Expense $ 3500 of mortgage interest on her residence should be allowed under Income of house property