Question

Which of the following expenses are classified as miscellaneous itemized deductions that are NOT subject to the 2% of AGI floor?

a. Tax return preparation fees
b. The unrecovered cost of a life annuity when the taxpayer dies
c. Gambling losses
d. Unreimbursed employee business expenses
e. Hobby expenses
f. Casualty and theft losses on property held for investment

Answer 1

Tax return preparation fees, unreimbursed employee business expenses, and casualty and theft losses on property held for investment are classified as miscellaneous itemized deductions that are not subject to the 2% of AGI floor.

Step-by-step explanation:

Of the expenses listed, the ones classified as miscellaneous itemized deductions that are NOT subject to the 2% of AGI floor are:

• Tax return preparation fees: These fees are deductible as a miscellaneous itemized deduction, but they are not subject to the 2% of AGI floor.
• Unreimbursed employee business expenses: These are expenses incurred by the taxpayer in connection with their employment, such as travel expenses or business supplies.
• Casualty and theft losses on property held for investment: If the taxpayer's property held for investment is damaged or stolen, they can deduct the loss as a miscellaneous itemized deduction.

All the other expenses listed (unrecovered cost of a life annuity, gambling losses, hobby expenses) are subject to the 2% of AGI floor.