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Further, the Court finds and holds that petitioner is not
liable for self-employment tax because of the exclusion accorded
employees by section 1402(c)(2).
II. Petitioner's Deductions
In light of the Court's holding that petitioner is not
entitled to deduct expenses on Schedule C, the Court must now
decide whether petitioner is entitled to deduct expenses incurred
in connection with her employment on her Schedule A. See sec.
67(a).
Deductions are a matter of legislative grace, and generally
the taxpayer bears the burden of proving the entitlement to any
deductions claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992). In this case, however, the burden of proof is on
respondent because respondent raised a new matter and has
asserted an increased deficiency. See Rule 142(a). Respondent,
therefore, must prove that petitioner is not entitled to the
deductions she claimed on her return.
Section 162(a) allows a taxpayer deductions for ordinary and
necessary business expenses paid or incurred during the taxable
year in carrying on a trade or business. Generally, a taxpayer
must establish that expenses deducted pursuant to section 162 are
ordinary and necessary business expenses and must maintain
records sufficient to substantiate the amounts of the deductions
claimed. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs. Section
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