During 2018, Fred Reardon incurred the following expenditures in connection with his coin collecting activities:
Travel expenses
$10,000
Purchase of coins still held at end of year
11,000
Cost of coins sold during year
9,000
Total
$30,000
Fred received $16,000 for the coins sold during the year.
(a.) If Fred's coin collecting activities are considered to be a hobby for tax purposes, what related expenditures are deductible on his 2018 tax return? Show computations and explain in detail.
(b.) If Fred's coin collecting activities are considered to be a trade or business for tax purposes, what related expenditures are deductible? Show computations and explain in detail.
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