Would any of the following items be deductible on an individual’s income tax ret
ID: 2415691 • Letter: W
Question
Would any of the following items be deductible on an individual’s income tax return? If so, would the item be deductible for or from AGI? Explain each item.
Deductible Y or N
For or From AGI
Explain
Stamp collecting expenses of $1,250 when stamp sales were only $400 and stamp collecting is considered a hobby
$3,000 loss on the sale of a personal sailboat
Interest of $8,000 on money borrowed to purchase tax-exempt securities.
A legal fee of $890 for estate planning advice of which 50 percent related to tax planning.
Deductible Y or N
For or From AGI
Explain
Stamp collecting expenses of $1,250 when stamp sales were only $400 and stamp collecting is considered a hobby
$3,000 loss on the sale of a personal sailboat
Interest of $8,000 on money borrowed to purchase tax-exempt securities.
A legal fee of $890 for estate planning advice of which 50 percent related to tax planning.
Explanation / Answer
Deductible Yes or No For or From AGI Explain Stamp collecting expenses of $1,250 when stamp sales were only $400 and stamp collecting is considered a hobby N - Hobby expenditures in excess of hobby gross income are not deductible. Hobby expenditures are only deductible to the extent of hobby gross income $3,000 loss on the sale of a personal sailboat N - Loss on sale of personal sailboat is not deductible. Personal losses are not deductible for tax purposes Interest of $8,000 on money borrowed to purchase tax-exempt securities. N - Interest on money borrowed to purchase tax-exempt securities is not deductible for tax purposes since the related tax-exempt income is not included in taxable income A legal fee of $890 for estate planning advice of which 50 percent related to tax planning. Y A legal fee of 890 for tax planning advice is deductible as a misc. itemized deduction. Any excess of total misc. itemized deduction expenses over .02 of AGI is deductible from AGI.
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