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Troy, New York. Troy treated petitioner as a common law employee
on the Forms W-2 it issued to petitioner. Petitioner does not
contest that classification.
While, under the nonexecuted employment agreement,
petitioner was to be reimbursed for his expenses, it is
undisputed that petitioner incurred expenses for which he was not
reimbursed. On his income tax returns, petitioner claimed
deductions for the expenses associated with his activities with
Empire on Schedule C, Profit or Loss From Business. The returns
were prepared by petitioner’s accountant who had full knowledge
of all of the facts. Respondent determined that these expenses
should be properly reported on Schedule A, Itemized Deductions,
as unreimbursed employee business expenses.
Discussion
There is no dispute that petitioner incurred the expenses
for the deductions he claimed. Rather, the dispute focuses on
whether petitioner should be considered a common law employee or
a statutory employee. If petitioner is characterized as a common
law employee, the deductions for his expenses are not deductible
in determining adjusted gross income, see sec. 62(a)(1), are
classified as “miscellaneous itemized deductions”, sec. 67(b),
and are limited “to the extent that * * * [they exceed] 2 percent
of adjusted gross income”, sec. 67(a). In addition,
miscellaneous itemized deductions are not deductible for
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