Question

Cecilia, employed as a nurse, incurred the following expenses during 2013.

$2,000 in attorney fees related to the collection of alimony payments
$8,000 in gambling losses
$1,000 in uniform purchase costs
$900 in union dues.


Cecilia also had stereo equipment valued at $3,000 stolen from her home in 2013. Cecilia's adjusted gross income (AGI) for 2013 was $90,000, included in which were gambling winnings of $2,000. For 2013, what is the amount of miscellaneous itemized deductions subject to the 2% of AGI limitation that Cecilia can report after deducting the 2% of AGI limitation?

A. $8,900
B. $2,100
C. $5,900
D. $3,100

Answer 1

Cecilia can report a total amount of $8,900 as miscellaneous itemized deductions subject to the 2% of AGI limitation.

Step-by-step explanation:

To calculate the amount of miscellaneous itemized deductions subject to the 2% of AGI limitation, we need to consider the various expenses incurred by Cecilia. The expenses that are subject to the 2% of AGI limitation are the attorney fees, union dues, and the portion of the gambling losses that exceeds the gambling winnings.

Attorney fees related to the collection of alimony payments are deductible as miscellaneous itemized deductions subject to the 2% of AGI limitation. So, Cecilia can deduct the full $2,000 for attorney fees.

Union dues are also deductible as miscellaneous itemized deductions subject to the 2% of AGI limitation. So, Cecilia can deduct the full $900 for union dues.

The portion of the gambling losses that exceeds the gambling winnings is deductible as a miscellaneous itemized deduction subject to the 2% of AGI limitation. Cecilia had $8,000 in gambling losses and $2,000 in gambling winnings, so the deductible portion is $6,000.

Therefore, the total amount of miscellaneous itemized deductions subject to the 2% of AGI limitation that Cecilia can report after deducting the 2% of AGI limitation is $2,000 + $900 + $6,000 = $8,900.