How much is the overall deductible amount

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Question - John Davis, a professional dentist, raises horses under circumstances that would indicate that the activity is a hobby. His adjusted gross income for the year is $100,000, and he has $2,000 of other miscellaneous itemized deductions, all of which are subject to the two-percent floor. During the taxable year, the cost for feeding horses was $3,000. The income from the sale of horses was $2,800.

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

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

Reference no: EM132017711

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