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.If Sadie itemizes her deductions she will not receive any tax benefit from the hobby expenses.
IV.If Sadie uses the standard deduction she will not receive any tax benefit from the hobby expenses.
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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.