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necessary expenses of his trade or business of being a Craft-
Barnett employee.
C. Proper Placement of Deductions
After concluding that the expenses are properly deductible
by petitioner, the next issue is whether petitioner properly
deducted the expenses on his Schedule C or whether the expenses
are subject to the 2-percent limitation of section 67 and the
limitation in section 68.
Section 62 lists the deductions from gross income which are
allowed for the purpose of computing adjusted gross income.
Section 62(a)(1) provides the general rule that trade or business
deductions are allowed for the purpose of computing adjusted
gross income “if such trade or business does not consist of the
performance of services by the taxpayer as an employee.”
Expenses of employment, if incurred under a reimbursement
arrangement with the employer, are deductible in computing the
employee’s adjusted gross income. See sec. 62(a)(2). Otherwise,
individuals with unreimbursed trade or business expenses from
their employment must deduct these expenses subject to the 2-
percent limitation of section 67. Gonzalez v. Commissioner, T.C.
Memo. 1997-430. These expenses may be further reduced pursuant
to section 68 if the individual’s “adjusted gross income exceeds
the applicable amount”. Sec. 68(a).
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