Problem 9-52 (LO. 5, 7, 10) B. J. and Carolyn Grace are full-time employees. B.
ID: 2561182 • Letter: P
Question
Problem 9-52 (LO. 5, 7, 10) B. J. and Carolyn Grace are full-time employees. B. J. is an elementary school teacher, and Carolyn is a registered nurse at a hospital During the year, they incur the following employment-related expenses School supplies for use in the classroom Emergency room uniforms Union dues (teachers association) Job hunting expenses (Carolyn obtained another nursing $1,400 800 200 position but decided not to change jobs) 1,300 Continuing education correspondence courses (required to maintain nursing license) 380 Professional dues and subscriptions 1,100 None of these expenses are reimbursed by the employers For the year, the Graces file a joint return reflecting salary income of $90,000. They also have gambling income of $6,000 and gambling losses of $7,000 (fully substantiated). They pay $400 to have their tax return prepared. They have other itemized deductions (i.e., interest on home mortgage, property taxes on personal residence, state income taxes, and charitable contributions) of $14,500 Determine the couple's AGI 95,750 V Determine the gross amount of miscellaneous itemized deductions subject to the 2%-of-AGI limitation 3,415 XExplanation / Answer
Solution:
a. Gross income:
Salary income $90,000
Gambling income 6,000
Less deductionsforAGI:
Educator deduction (250)
AGI $95,750
b. Miscellaneous itemized deductions subject to the 2%-of-AGI limitation:
School supplies *$1,150
Uniforms 800
Union dues 200
Job hunting expenses **1,300
Continuing education expenses 380
Professional dues and subscriptions 1,100
Tax return preparation fee 400
Total $5,330
Less: 2% × $95,750 (AGI) (1,915)
$3,415
Add itemized deductions not subject to 2%-of-AGI limitation 20,500***
Total itemized deductions $23,915
*B. J. qualifies as asecondaryschool teacher, and this amount represents the excess over the$250 claimed as a deductionforAGI.
**A change of jobs is not required.
***Includes $6,000 of gambling losses (limited to gambling income); ($6,000 + $14,500 =$20,500)
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