Sam Adams is a CPA who is also an aspiring actor. In 2011, his AGI (before any deductions for performing arts expenses) was $42,000 and was from the following sources:
CPA practice ................................. $30,000
Acting jobs (4 employers) .................... 12,000
Expenses associated with his acting career were $9,000. Sam deducted these expenses under § 162 and classified them as deductions for AGI under § 62(a)(2)(B).
The IRS contends that the expenses are not eligible for treatment under § 62 (a) (2) (B) and should be classified as miscellaneous itemized deductions (subject to the 2%-of-AGI floor). According to the IRS, § 62 (a) (2) (B) is not available because Sam has exceeded the AGI ceiling under § 62 (b) (1) (C). Advise Sam on the appropriate tax treatment?