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by being allowed to deduct all expenses “attributable to a trade
or business carried on by” them in computing their adjusted gross
income; these expenses are coextensive with all the trade or
business expenses they are entitled to deduct under section
162(a). Employees, on the other hand, are allowed by paragraph
(2) to deduct only a very restricted category of their trade or
business expenses in computing adjusted gross income. In
addition, these expenses must be “in connection with” the
employee’s rendering of services to the employer.
Paragraph (2)(A) of section 62(a),6 entitled “Reimbursed
expenses of employees”, provides that a taxpayer is allowed a
deduction from gross income in arriving at adjusted gross income
for “The deductions allowed by part VI (section 161 and
following) which consist of expenses paid or incurred by the
taxpayer, in connection with the performance by him of services
as an employee, under a reimbursement or other expense allowance
5(...continued)
of a $151,896 deduction, whereas the taxpayer in Kenseth had his
deduction of $91,800 reduced by $5,298 under sec. 67 and phased
out to the extent of $4,694 under sec. 68 and was subject to an
AMT liability of $17,198 as a result of the disallowance of the
miscellaneous itemized deduction for AMT purposes under sec.
56(b)(1)(A)(i).
6Sec. 62(a)(2)(B) and (C) eases the restrictions for two
narrow classes of employees. Performing artists who meet the
requirements of sec. 62(b) and employees of a State or a
political subdivision are allowed to deduct all their otherwise
allowable trade or business expenses from gross income in
arriving at adjusted gross income.
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