Michael L. and Ann Burski - Page 14




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          adjustment made in the notice of deficiency is treated as new               
          matter when it either alters the original deficiency or requires            
          the presentation of different evidence.  Wayne Bolt & Nut Co. v.            
          Commissioner, 93 T.C. 500, 507 (1989).  A new theory that merely            
          clarifies or develops the original determination is not new                 
          matter.  Id.                                                                
               In the notice of deficiency, respondent treated petitioner             
          as an employee of IDA consistent with his reporting the                     
          compensation from IDA as wages, salaries, tips, etc. on the                 
          returns.  Consequently, respondent disallowed all deductions                
          petitioner claimed on Schedule C for each year but allowed                  
          petitioner to deduct some of the items as unreimbursed employee             
          expenses on Schedule A.  The notice of deficiency explained that            
          deductions were not allowed on Schedule C because petitioner had            
          not established that he incurred, or if he incurred, paid the               
          amounts for ordinary and necessary business purposes and that any           
          amount qualifies as a business expense as specified under the               
          provisions of the Internal Revenue Code.                                    
               The notice of deficiency raised two issues that are relevant           
          here.  The first is whether petitioner was an independent                   
          contractor entitled to fully deduct allowable expenses on                   
          Schedule C or an employee of IDA entitled to deduct the expense             
          on Schedule A, subject to the 2-percent limitation under section            
          67.  The second is whether any of the travel expenses for which             







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