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carrying on a trade or business. Section 62(a)(2) allows a
deduction for expenses paid or incurred by the taxpayer, in
connection with the performance of services as an employee, under
a reimbursement or other expense allowance arrangement with his
employer. Such expenses are deductible as miscellaneous itemized
deductions subject to the 2-percent of adjusted gross income
floor. Sec. 67.
Respondent disallowed $3,546, the total amount of expenses
claimed on Thomas' 1993 Schedule C, because Thomas did not
establish that the expenses were for an ordinary and necessary
business purpose. The notice of deficiency stated that the
"expenses are employee business expenses properly deductible as
miscellaneous deductions on Schedule A; however, you did not
itemize deduction[s] and the standard deduction is to your
advantage". At trial, Thomas testified that the amounts were
spent for car washes, gas, and parts for the cars owned by
Southern Auto. These amounts properly are deductible under
section 62(a)(2) as miscellaneous itemized deductions. However,
Thomas did not elect to itemize on his 1993 return. Accordingly,
we sustain respondent on this issue.
Because of the additional Schedule C income of $1,700 and
the disallowance of $3,546 of Schedule C expenses for 1993,
Thomas is liable for an increase in self-employment tax of $741
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