- 5 -
constituted salary or wage income and not gross receipts from a
trade or business activity. Respondent also disallowed the cost
of goods sold adjustment and all the claimed Schedule C expense
deductions for lack of substantiation. Respondent made no
allowance for deduction of any of the claimed expenses as
itemized deductions. The child care credit claimed for both
years was disallowed; however, respondent conceded that
adjustment at trial. Petitioner's claimed head-of-household
filing status under section 2(b)(1) was allowed.
With respect to the first issue, adjusted gross income
generally consists of gross income less trade or business
expenses, except in the case of the performance of services by an
employee. Sec. 62. An individual performing services as an
employee may deduct miscellaneous itemized deductions incurred in
the performance of services as an employee only to the extent
such expenses exceed 2 percent of the individual's adjusted gross
income. Sec. 67(a). The deduction for business expenses under
section 162 is included in miscellaneous itemized deductions.
Sec. 67. The Commissioner has ruled that an individual who is a
statutory employee under section 3121(d)(3), which relates to
employment taxes, is not an employee for purposes of sections 62
and 67, and, therefore, a statutory employee under section
3121(d)(3) is not subject to the section 67(a) 2-percent
limitation for expenses incurred by such employee in the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011