Sadie Is a Full Time Nurse and a Part Time

Multiple Choice

Sadie is a full time nurse and a part time painter.Her painting qualifies as a hobby.Her gross income from painting is $7,000.Her expenses include $800 of interest on inventory loans,$5,200 of expenses in conducting business activities,and $2,000 of depreciation of equipment.Which of the following statements about Sadie's hobby activity is/are correct?
I.Sadie will not recognize any taxable income as a result of her hobby.
II.Sadie can deduct the interest of $800 plus $6,200 of other hobby expenses for the year.
III.Sadie will lose at least $1,000 of her depreciation deduction for the current year.
IV.If Sadie uses the standard deduction she will not receive any tax benefit from the hobby expenses.
​

A) Statements I and II are correct.
B) Statements II and III are correct.
C) Statements III and IV are correct.
D) Statements I,II,and III are correct.
E) Statements II,III,and IV are correct.