imaattion,
I agree with you that the important thing is the intention of the daughter. For now we only have the parent's read on that. It is quite possible that the daughter was looking to earn some money over the summer before college and that a paid opportunity arose which she felt superior to options such as waitressing or stocking shelving at a store which would have been W-2 earnings. As you had mentioned, she might well also be looking ahead to exploring fine arts as a future career. The IRS provides a list of 9 factors to consider in deciding if such nonemployee income is hobby or business:
Federal Register Title 26 v3 section 1.183-2
Ultimately it's up to the family to look this over and decide.
