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of section 62 and may deduct business expenses on Schedule C).
Respondent contends that his position disallowing
petitioner’s claimed Schedule C deductions was substantially
justified during the administrative process. We agree.
Petitioner filed her return, along with a Form W-2, listing
income from USA Mobile. She also reported related business
expense deductions on Schedule C. Petitioner has the
responsibility to substantiate her status as a statutory employee
so that she may report her deductions on Schedule C. See sec.
6001; Higbee v. Commissioner, 116 T.C. 438, 440 (2001); sec.
1.6001-1(a), Income Tax Regs. As a common law employee,
petitioner generally would be required to report her employee
business expense deductions on Schedule A. In the absence of
further explanation on the return, or persuasive proof of
petitioner’s status as a statutory employee, respondent was
reasonable to challenge petitioner’s Schedule C expense
deductions.
After respondent issued the 30-day letter, petitioner
attempted to explain her filing position to respondent. Her
explanations, though, were inconsistent and did not support her
use of Schedule C. In the first letter, petitioner contradicted
her filing position and stated that the Form W-2 income belonged
on line 7 with related expenses on Schedule A. In the second
letter petitioner reversed her argument again to affirm her
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