Simon lost $5,000 gambling this year on a trip to Las Vegas. In addition, he paid $2,000 to his broker for managing his $200,000 portfolio and $1,500 to his accountant for preparing his tax return. In addition, Simon incurred $2,500 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. Simon's AGI is $40,000. b. Simon's AGI is $200,000.

a. $2,700

b. $0

Explanation:

a. $2,700

The $5,000 gambling losses will not be deducted.

The transportation costs will not be deducted because it is his personal expenses.

Deductibles will include his investment fees of $2,000 and tax return fees of $1,500 and the total sum of fees must fall below 2% of his Adjusted Gross Income before any deduction can be computed.

= (2% x $40,000) = $800

=$2,000 + $1,500 - $800 = $2,700

b. $0

The $5,000 gambling losses will not be deducted.

The transportation costs will not be deducted because it is his personal expenses.

Deductibles will include his investment fees of $2,000 and tax return fees of $1,500 and the total sum of fees must fall below 2% of his Adjusted Gross Income.

= (2% x $200,000) = $4,000

=$2,000 + $1,500 = $3,500

Note - The However, because the 2% AGI (2% x $200,000 AGI = $4,000) exceeds the sum of the broker management fees ($2,000) and the tax return fees ($1,500). He won't deduct anything