Question

Simon lost $4,300 gambling this year on a trip to Las Vegas. In addition, he paid $2,650 to his broker for managing his $265,000 portfolio, and $1,030 to his accountant for preparing his tax return. In addition, Simon incurred $3,160 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).

Answer 1

Answer:

$3680

Explanation:

Simon's expenses can be grouped into two classes namely:

- tax deductible expenses.

- non-tax deductible expenses

From the question, his tax deductible expenses are

Broker fees : $2650

Accountant fees : $1030

(for preparing tax returns)

                           =  $3680

His transportation expense is not tax-deductible as it is seen as a personal expense while his gambling loss of $4300 is only deductible to the extent of gambling wins itemized. Since he didn't itemize any gambling wins, his gambling loss is not tax-deductible.

Answer 2

Answer:

Assuming Simon’s AGI is $40,000.

Gambling losses are only deductible to the extent of gambling winnings. Thus,Simon cannot deduct any of the $4,300 gambling losses. The $3,160 transportation expenses are also nondeductible as they are deemed to be personal expenses. The $2,650 broker management fees are deductible as investment fees (miscellaneous itemized deductions subject to the 2% AGI floor), and the $1,030 tax return fees are also deductible as miscellaneous itemized deductions subject to the 2% AGI floor.

Thus, $2,650 + $1,030 – (2% x $40,000 AGI) = $2,880 deduction