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Adjusted gross income is calculated by deducting from gross
income, inter alia, trade or business expenses "if such trade or
business does not consist of the performance of services by the
taxpayer as an employee." Sec. 62(a)(1). Congress decided that
allowance of these deductions "above the line" is
necessary to make as nearly equivalent as practicable
the concept of adjusted gross income, when that concept
is applied to different types of taxpayers deriving
their income from varying sources. Such equivalence is
necessary for equitable application of a mechanical tax
table or a standard deduction which does not depend
upon the source of income. * * * [S. Rept. 885, supra,
1944 C.B. at 877-878.]
The Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085,
limited the deductibility of miscellaneous itemized deductions,
allowing their deduction only in excess of 2 percent of adjusted
gross income. See sec. 67. In Lickiss v. Commissioner, T.C.
Memo. 1994-103, we held that section 67 did not create an
unconstitutional distinction vis-a-vis the expenses of employees
and of self-employed individuals. We noted that Congress imposed
the limitation to simplify the enforcement and administrative
aspects of the tax law as well as to ease the recordkeeping
burdens on taxpayers.
In creating the AMT, Congress sought to correct the "unfair
distribution of tax burden resulting from abuses by individuals
who escaped taxation on certain portions of their income because
of provisions in the tax laws." Graff v. Commissioner, 74 T.C.
743, 767 (1980), affd. per curiam 673 F.2d 784 (5th Cir. 1982).
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Last modified: May 25, 2011