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IV. Claimed Business Expenses
From our holding above, it follows that petitioners would
not be entitled to deduct claimed business expenses on Schedules
C by reason of petitioner’s status as an employee of DWP. In
addition, any deduction of the claimed business expenses, even on
Schedules A, is precluded on account of petitioners’ failure
properly to substantiate the expenditures.
The business expenditures potentially deductible in
accordance with sections 62(a) and/or 67 are described in section
162(a) as “all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business”. For purposes of this section, an individual may
engage in the trade or business of rendering services as an
employee. Johnson v. Commissioner, 115 T.C. 210, 217 (2000);
O’Malley v. Commissioner, 91 T.C. 352, 363-364 (1988).
The breadth of section 162(a) is tempered by the requirement
that any amount claimed as a business expense must be
substantiated, and taxpayers are required to maintain records
sufficient therefor. Sec. 6001; Hradesky v. Commissioner, 65
T.C. 87, 89-90 (1975), affd. 540 F.2d 821 (5th Cir. 1976); sec.
1.6001-1(a), Income Tax Regs.1 When a taxpayer adequately
1 Sec. 7491, effective for court proceedings which arise in
connection with examinations commencing after July 22, 1998, can
operate in specified circumstances to place the burden of proof
on the Commissioner if the taxpayer introduces credible evidence
(continued...)
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