Question

For an activity classified as a hobby, the expenses are categorized as follows:

Answer 1

Answer:

Option C is correct.

The correct sequence is (2), (3), (1)

Explanation:

(2) Amounts deductible under other Code sections without regard to the nature of the activity, such as property taxes and home mortgage interest. should be deducted first

(3) Amounts deductible under other Code sections if the activity had been engaged in for profit, but only if those amounts do not affect adjusted basis (e.g., maintenance, utilities, and supplies). are deducted next

(1)Deductions affecting adjusted basis (e.g., depreciation) are taken next. At any point where the expenses exceed income,   the deduction is limited to the remaining income.