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1994 4,012 802
Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure. After concessions, the issues for decision are: (1)
Whether petitioners are entitled to deduct certain unreimbursed
employee expenses; (2) whether petitioners are entitled to
Schedule C losses; and (3) whether petitioners are liable for
accuracy-related penalties pursuant to section 6662(b)(1).
At the time Shane and Marina Appling filed their petition,
they resided in El Paso, Texas, where Mr. Appling was employed as
a civil engineer for Silverton Construction Co. (Silverton). On
their 1992, 1993, and 1994 Federal income tax returns,
petitioners deducted $17,418, $19,132, and $14,590, respectively,
for unreimbursed employee expenses relating to Mr. Appling's job
with Silverton. Respondent determined that petitioners were only
entitled to deduct $3,009, $3,207, and $3,438, respectively, of
such expenses.
Generally, an employee may deduct unreimbursed employee
expenses pursuant to section 162(a). An employee may not deduct
such expenses, however, if the expenses are not substantiated or
if the employee has a right to, but fails to seek, reimbursement
from the employer. Kennelly v. Commissioner, 56 T.C. 936, 943
(1971), affd. without published opinion 456 F.2d 1335 (2d Cir.
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