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It is determined that the expenses claimed on your
Forms 2106 in the amounts of * * *, including those
claimed as miscellaneous itemized deductions, are
disallowed because * * * [reason for disallowance].
Petitioners argue that the above-quoted paragraphs would
have made it clear that the expenses claimed on the Forms 2106
were being disallowed. We note that petitioners’ suggested
explanation treats reporting the compensation on the Forms 2106
as the equivalent of including it in gross income. We do not
agree with petitioners’ approach. It is petitioners’ contention
that without the third paragraph the issue of the deductibility
of the expenses claimed on the Forms 2106 has not been subjected
to our jurisdiction.
We must note that petitioners’ first recommended paragraph
addressing the reduction of income by the compensation reflected
on the Form 2106 is incorrect and/or unnecessary. The
compensation referred to in petitioners’ first paragraph had no
effect on petitioners’ taxable income because of the offset. The
language used by respondent to increase gross income by the Form
1099-MISC compensation identified the source of the increase and
the variance from the method petitioners used to reflect the
income. Certainly, respondent’s determination would have been
more explicit and thorough if it had contained some reference to
the expenses that petitioners had offset on their Forms 2106.
For example, the following language would have been helpful:
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Last modified: May 25, 2011