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Based on the facts recited earlier, the Court holds that
petitioner was a common-law employee under section 3121(d)(2)
and, therefore, was not a statutory employee under section
3121(d)(3). Respondent is sustained on this issue.
The second issue is petitioner's entitlement to deductions
for expenses incurred in connection with his employment, as
itemized deductions, to the extent such expenses exceed 2 percent
of his adjusted gross income each year. Sec. 67(a).
The first item to be considered is the cost of goods sold
that petitioner claimed as a reduction of his gross receipts.
Petitioner explained at trial that the amounts claimed
represented stale, unsold merchandise he removed from store
shelves. The Court holds that petitioner is not entitled to such
reduction because he had not purchased the products he delivered;
consequently, he had no basis in the returned goods. Although
petitioner lost the commissions on the returned goods, the Court
concludes from the record that the income amounts shown on the
Forms W-2 represented the net commissions paid to petitioner
after deducting the forfeited commissions. Petitioner,
therefore, is not entitled to either a cost of goods sold
adjustment or a deduction for forfeited commissions.
The expenses deducted by petitioner on Schedules C for both
years were:
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Last modified: May 25, 2011