How much is the overall deductible amount of smiths itemized

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Problem

Bob Smith, a professional basketball player, raises Black Angus cattle under circumstances that would indicate that the activity is a hobby. His adjusted gross income for the year is $80,000, and he has $1,000 of other miscellaneous itemized deductions, all of which are subject to the 2% floor. During the taxable year, the feed for the cattle costs $3,000. The income from the sale of cattle was $2,800.

(a) Under the hobby loss rule, to what extent is the expense of $3,000 deductible?

(b) Under the 2%-of-adjusted-gross-income limitation, how much is the overall deductible amount of his itemized deductions?

Reference no: EM131820134

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