- 9 - income and to claim their employee expenses, if properly substantiated, on Schedule A as a deduction from AGI, subject to certain limitations. Accordingly, we must conclude that respondent’s determinations that the nonemployee compensation reflected on the Forms 1099-MISC is includable in gross income were not in error.4 Petitioners contend that they need not prove or justify their employee expenses because of respondent’s failure to expressly state that petitioners were not entitled to claim the expenses. Petitioners argue that the offsetting expenses reflected on the Forms 2106 are not in issue and that we have no jurisdiction over them. If that were petitioners’ sole argument, even if they were successful, it would have no effect on the income tax deficiencies determined by respondent.5 That is so because petitioners used the expenses to offset compensation that 4 In addition, petitioners do not question the correctness of respondent’s determination that they failed to show that the excess amounts of employee expenses that were claimed on the Schedules A were ordinary and necessary or expended for the purpose stated. 5 We must note that if respondent had merely disallowed the offsetting expenses reflected by petitioners on their Forms 2106 and had not made any adjustment to the Form 1099-MISC compensation, there would have been no resulting income tax deficiency. That is so because petitioners did not first include the compensation in the gross income that was used to compute their adjusted gross income and, ultimately, their taxable income.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011