Samantha an executive has AGI of $100000 before considering income or loss from her miniature horse business. Her outside income comes from prizes for
winning horse shows stud fees and sales of yearlings. Samantha%u2019s home is on 20 acres half of which she uses for the horse activity (i.e. stables
paddocks fences tack houses and other related improvements). Samantha%u2019s office in her home is 10% of the square footage of the house. She uses the
office exclusively for maintaining files and records on the horse activities. Her books show the following income and expenses for the current year:

Income from fees prizes and sales $22000 Expenses Entry fees 1000 Feed and veterinary bills 4000 Supplies 900 Publications and dues 500 Travel to horse
shows (no meals) 2300 Salaries and wages of employees 8000 Depreciation %u2014 Horse equipment $3000 Horse farm improvements 7000 On 10% of personal
residence 1000 11000 Total home mortgage interest 24000 Total property taxes on home 2200 Total property taxes on horse farm improvements 800

The mortgage interest is only on her home because the horse farm improvements are not mortgaged. a. What are Samantha%u2019s tax consequences if the miniature
horse activity is a hobby? b. If it is a business?