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shifted to the Commissioner where the “taxpayer introduces
credible evidence with respect to * * * such issue.” Sec.
7491(a)(1). The burden will shift only if the taxpayer has
complied with the substantiation requirements and has cooperated
with the Commissioner’s reasonable requests for witnesses,
information, documents, meetings, and interviews. Sec.
7491(a)(2).
Petitioners have not alleged or proven that section 7491(a)
applies; accordingly, petitioners must prove that they are
entitled to the deductions. See INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992) (stating that deductions are strictly a
matter of legislative grace, and taxpayers bear the burden of
proving that they are entitled to claim the deduction).
II. Unreimbursed Employee Business Expenses
It is well established that an individual may be in the
trade or business of being an employee and that ordinary and
necessary expenses incurred in his trade or business are
deductible subject to the limitations of section 67.3 See secs.
67(a) and (b), 162(a); Primuth v. Commissioner, 54 T.C. 374
(1970); Christensen v. Commissioner, 17 T.C. 1456 (1952).
3 Sec. 67(a) imposes a limitation on the deductibility of
an individual’s miscellaneous itemized deductions: such
deductions are allowable only to the extent that the aggregate
deductions exceed a floor of 2 percent of adjusted gross income
(AGI). The term “miscellaneous itemized deductions” is defined
in sec. 67(b) as those itemized deductions that are not
specifically enumerated therein.
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Last modified: March 27, 2008