- 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