- 16 - Respondent also increased income by the amounts of the excess expenses claimed on the Schedules A, which respondent disallowed for lack of a showing that the expenses were ordinary and necessary or that they were expended for the stated purpose. If respondent had specifically and expressly “disallowed” the offsetting expenses as petitioners suggest, the disallowance would not have resulted in any increase or decrease in the amounts of the deficiencies determined. Finally, because respondent included the unreduced amounts of the Form 1099-MISC compensation in income, petitioners would be able to comprehend that respondent was giving no effect to the expense setoffs.9 In a recent case, we considered whether the Commissioner’s position was new matter in the context of section 7522. Shea v. 9 Petitioners’ arguments herein make it obvious that they were aware that the expenses that they had offset against the income on the Forms 2106 were not being given any effect because of the resultant income tax deficiency. If petitioners had chosen to give them effect, they would have had to assert and prove their entitlement to the expenses. If petitioners had been successful in showing their entitlement to the expenses, they would not have been entitled to deduct them from or offset them against gross income, as they attempted to do on the Forms 2106. The expenses would have been deductible on Schedule A and subject to various limitations that would result in reduced amounts’ being allowable. We also note that petitioners deducted the excess by which the expenses exceeded the Forms 1099-MISC compensation on their Schedules A. Petitioners, however, did not follow that route and instead chose to wage a collateral attack on respondent’s determination. In that regard, petitioners did not question respondent’s determination that they had not shown that such expenses claimed on the Schedules A were not ordinary and necessary and/or that they were expended for the stated purpose.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