Simon lost $9,050 gambling this year on a trip to Las Vegas. In addition, he pai

Question

Simon lost $9,050 gambling this year on a trip to Las Vegas. In addition, he paid $2,550 to his broker for managing his $255,000 portfolio and $1,285 to his accountant for preparing his tax return. In addition, Simon incurred $3,420 in transportation costs commuting back and forth from his home to his employer's office, which were not reimbursed. Calculate the amount of these expenses that Simon is able to deduct, assuming he itemizes his deductions, in each of the following situations:

A)AGI is 31,200

B)Simon’s AGI is $202,400

Explanation / Answer

Answer:

A) Gambling losses are only deductible to the extent of gambling winnings.Thus, Simon cannot deduct any of the $9050 gambling losses. The $3420 commuting expenses are also non deductible as they are deemed to be personal expenses. The $ 2550 broker management fees are deductible as investment fees (miscellaneous itemized deductions subject to the 2% of AGI floor), and the $ 1285 tax return fees are also deductible as miscellaneous itemized deductions subject to the 2% of AGI floor. Thus, Simon may deduct $3211 of these expenses ($2550+$1285 - (2%*$31200) = $3211)

B) Gambling losses are only deductible to the extent of gambling winnings.Thus, Simon cannot deduct any of the $9050 gambling losses. The $3420 commuting expenses are also non deductible as they are deemed to be personal expenses. The $ 2550 broker management fees are deductible as investment fees (miscellaneous itemized deductions subject to the 2% of AGI floor), and the $ 1285 tax return fees are also deductible as miscellaneous itemized deductions subject to the 2% of AGI floor.However, because the 2% AGI floor (2%*202400 AGI = $4048) exceeds the sum of the broker management fees ($2550) and the tax return fees ($1285), Simon will not be able to deduct either of these expenses.

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