Ted is a successful attorney, but when he turned 50 years old he decided to retire from his law practice and become a professional golfer. Ted has been a very successful amateur golfer, so beginning this year Ted began competing in professional golf tournaments. At year-end, Ted reported the following expenses associated with competing in 15 professional events:
Transportation from his home to various tournaments .............................. $25,000
Lodging for the 15 weeks on the road ................................................. 18,200
Meals while traveling and during golf tournaments ................................. 5,200
Entry fees .................................................................................. 7,500
Lessons from various golf teachers .................................................... 12,500
Golf supplies (balls, tees, etc.) .......................................................... 783
Total expenses ............................................................................. $69,183
a. Suppose that Ted reports $175,000 in gross income from his pension and various investments. Describe the various considerations that will dictate the extent to which Ted can deduct the expenses associated with professional golf.
b. Calculate Ted's deduction for golf expenses assuming that the IRS and the courts are convinced that Ted engages in competitive golf primarily for enjoyment rather than the expectation of making a profit. Assume Ted wins $10,000 this year and his AGI is $185,000 (including the golf revenues).