Question

1. Gambling losses. Khanh played poker four times during the year. She had two winning sessions, winning $4,700 in one and $3,500 in the other. She had two losing sessions, losing $7,200 in one and $2,600 in the other. How much is the itemized deduction for gambling losses that Khanh can claim?

2. Legal damages. Daomei suffered a serious infection and lost a leg as a result of medical malpractice. Daomei sued the hospital where she was treated. She won the case and was awarded the following amounts as damages: $14,000 for medical expenses, $30,000 for emotional distress resulting from the injuries and $80,000 as punitive damages. How much gross income must Daomei recognize?

Answer 1

1. khanh can claim itemized deduction for gambling losses up to the amount of winnings.

In the given case khanh has Total amount of winning which is

Winning(one) =$4700

Winning(Other) =$3500

Total winning =$8200

Gambling losses:

Loss(one) =$7200

Loss(other) = $2600

Total Losses=  $9800

Conclusion:Even the gambling losses($9800) of khanh is more than Winnings($8200). He can claim itemized deduction upto to the extent of winning which is $8200.

2. Gross Income which Daomei should recognize:

  Medical Expenses Nil

Emotional Distress resulting from injury Nil

Punitive Damages $80000

  GROSS INCOME $80000

NOTE:As Medical expenses are Actual compensatory damages which are incurred by Daomei these

are excluded from Calculation of Gross Income.

Note:As damages from emotional distress resulting from injuries is General Compensatory damage which is the

Estimate loss expenditure are excluded while calculating

Gross Income.

Note:Punitive Damages are the damages which exceeds from

damages incurred in case of Actual and General

Compensatory damage. So it will be included in Gross Income.

PLEASE UPVOTE IF YOU FIND THE SOLUTION HELPFUL.