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limitation, in the amount of * * * rather than * * * as
claimed on your * * * income tax return, since it has
not been established that any amount in excess of that
allowed constitutes an ordinary and necessary business
expense, was expended, or was expended for the
designated purpose. Accordingly, you are not allowed a
deduction in the amount of * * * as claimed on your
* * * income tax return.
There is no explanatory language in the notices expressly
disallowing the offset of expenses that petitioners had claimed
on the Forms 2106. It is clear, however, from the above
explanatory language that respondent determined that petitioners’
income should be increased by the amount of the Form 1099-MISC
nonemployee compensation that petitioners had reflected and
offset on Forms 2106. It also follows that respondent’s
determinations increasing gross income were not first being
reduced by the employee expenses claimed by petitioners on the
respective Forms 2106.
Petitioners contend that respondent’s determination would
have passed muster if it had been expressed by means of the
following three paragraphs petitioners propose:
It is determined that you did not receive nonemployee
compensation in the respective amounts of * * *. As a
result, the amounts reported as nonemployee
compensation on your Forms 2106 are reduced * * * [in
the following amounts].
It is determined that you received income from American
Energy Services, Inc. in the respective amounts of
* * * which should have been reported as compensation
for services. Accordingly, your gross income is
increased * * * [in the following amounts].
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Last modified: May 25, 2011