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While examination of petitioners’ 1999 tax return commenced
after July 22, 1998, neither of the parties has addressed the
applicability of section 7491(a) regarding the burden of proof.
Petitioners have not offered any evidence that they satisfied any
of the criteria of section 7491(a)(2)(A) and (B). Accordingly,
we conclude that the burden of proof remains on petitioners.
Unreimbursed Employee Expenses
Petitioners deducted the following as unreimbursed employee
expenses on their 1999 tax return: (1) Key man insurance
premiums of $2,335; (2) petitioner Brody’s vehicle expense of
$5,059; and (3) Personal LC to pay KOA bills of $50,000.00.
General Principles
Section 162(a) allows a deduction for all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a taxpayer’s trade
or business as an employee. See Primuth v. Commissioner, 54 T.C.
374, 377-378 (1970). An employee, however, is not entitled to a
deduction for an expense if the employee has a right of
reimbursement from his or her employer, because the employee’s
expenditure is not “necessary”. Heidt v. Commissioner, 274 F.2d
25, 28 (7th Cir. 1959), affg. T.C. Memo. 1959-31; Lucas v.
Commissioner, 79 T.C. 1, 7 (1982). As we stated in Stolk v.
Commissioner, 40 T.C. 345, 356 (1963), affd. per curiam 326 F.2d
760 (2d Cir. 1964): “These charges were business expenses of the
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