- 15 -
To the extent that you wish to claim the expenses shown
on Form 2106, they must be claimed on Schedule A, but
they are allowable only to the extent that you show
them to be ordinary and necessary business expenses
and/or to have been expended for the designated
purposes.
If respondent had made an explanation regarding the offsetting
expenses, it would have been merely advisory and precatory. It
would not explain a disallowance that resulted in an income tax
deficiency. In the circumstances of these cases, respondent’s
failure to expressly disallow the offsetting expenses was not
tantamount to approving them as petitioners have contended.
The Commissioner is required to inform taxpayers of
deficiency determinations. There is no particular form to be
used or specific requirement as to the content of a notice of
deficiency. Jarvis v. Commissioner, 78 T.C. 646, 655-656 (1982).
The notice must “fairly advise [petitioners] that deficiencies in
income taxes and additions to the tax had been determined and the
years and amounts thereof.” Id. In addition, section 7522
requires that the notices describe the basis for, and identify
the amounts (if any) of, the tax due.
The notices that respondent issued to petitioners met those
basic standards. Respondent did provide a paragraph explaining
each adjustment that accounted for the total amounts of the
deficiencies determined. Respondent increased gross income by
the Form 1099-MISC compensation, unreduced by the amounts of
expenses that petitioners had used as setoffs on the Forms 2106.
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