Kevin and Bridget Naughton - Page 18




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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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