                          T.C. Memo. 1995-502



                        UNITED STATES TAX COURT


                   THOMAS N. RAWLINS, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent


        Docket No. 13383-94.                  Filed October 18, 1995.


        Thomas N. Rawlins, pro se.

        Louis H. Hill, for respondent.


                          MEMORANDUM OPINION

        POWELL, Special Trial Judge:     This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1    This case was submitted at trial fully stipulated.




1
    All section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
     Respondent determined a deficiency in petitioner's 1992

Federal income tax in the amount of $1,648.   Petitioner resided

in Wheelersburg, Ohio, at the time the petition was filed.

     The issue is whether petitioner is subject to the

alternative minimum tax (AMT) imposed by section 55.

     Petitioner is an electrician and a union member.    Although

his job assignments are generally for relatively short periods of

time, he works as a common law employee for each of his

employers.    Petitioner filed a 1992 Federal income tax return as

a married taxpayer filing separately reflecting the following

information:

     Adjusted gross income                          $48,271
     Schedule A--Itemized deductions
       Taxes                               $1,861
       Home mortgage interest               1,647
       Contributions                        1,950
       Misc. itemized deductions:
         Unreimbursed employee
          expenses                $13,230
         Tax preparation               50
         Sec. 67 limit               (965)
                                   12,315
     Total itemized deductions                       17,773
     Personal exemptions                              6,900
     Taxable income                                  23,598
     Income tax liability                            $4,274

     Respondent does not challenge any item of income or the

deductions.    Rather, respondent determined that petitioner had an

additional AMT liability in the amount of $1,648, calculated as

follows:
                                - 3 -

       Alternative minimum taxable income:
            Taxable income (before
              deductions for exemptions)              $30,498
            Adjustments:
              Misc. itemized deductions    12,315
              Taxes                         1,861
            Total adjustments                          14,176
                                                       44,674
            Exemption amount                           20,000
            Tentative minimum taxable income           24,674
                                                        x 24%
            Tentative minimum tax                       5,922
            Regular tax                                 4,274
            AMT                                        $1,648

Petitioner does not challenge respondent's calculation of the

tax.    He argues, rather, that the AMT imposed by section 55(a)

unconstitutionally distinguishes between the expenses of self-

employed individuals and employees in violation of the Due

Process Clause of the Fifth Amendment.

       Generally, under the AMT scheme an individual's tax

liability is equal to 24 percent of the so-called "tentative

minimum taxable income", which is the excess of the "alternative

minimum taxable income" (AMTI) over the exemption amount provided

by section 55(d)(1).    Sec. 55(b)(1).    AMTI is determined,

generally, through adjustments to the taxpayer's taxable income

pursuant to sections 56, 57, and 58.      Sec. 55(b)(2).   In

determining the AMTI of individuals, no deduction is allowed for

miscellaneous itemized deductions.      Sec. 56(b)(1)(A)(i).    The

trade or business expenses of a self-employed taxpayer, however,

are deductible "above the line" in arriving at adjusted gross

income under section 62(a)(1); generally these deductions are not
                               - 4 -

affected by the AMT calculations.    See Johnson v. Commissioner,

T.C. Memo. 1993-530.   It is this distinction between employees

and self-employed persons that petitioner attacks.

     To the extent a statutory classification results in

disparate treatment, the classification is permissible if it has

a reasonable relation to a legitimate governmental end.       Welch v.

Henry, 305 U.S. 134, 144 (1938); Okin v. Commissioner, 808 F.2d

1338, 1342 (9th Cir. 1987), affg. T.C. Memo. 1985-199; see also

Vance v. Bradley, 440 U.S. 93, 96-97 (1979).    In this regard, a

classification does not violate equal protection or due process

principles "if any state of facts rationally justifying it is

demonstrated to or perceived by the courts."     United States v.

Maryland Savings-Share Ins. Corp., 400 U.S. 4, 6 (1970).

     Prior to 1944, trade or business expenses were deducted from

gross income regardless of the individual's employment status.

See sec. 23(a)(1)(A), Internal Revenue Code of 1939.    The

Individual Income Tax Act of 1944, ch. 210, 58 Stat. 231,

introduced the concepts "adjusted gross income", "itemized

deductions", and "standard deduction" in an effort to simplify

tax administration and compliance.     See S. Rept. 885, 78th Cong.,

2d Sess. (1944), 1944 C.B. 858, 858-859.    Under this scheme,

individuals may account for their deductible expenses as itemized

deductions, or they may eschew recordkeeping and claim the

standard deduction amount.   See sec. 63.   The amount is then

deducted from adjusted gross income.
                                - 5 -

     Adjusted gross income is calculated by deducting from gross

income, inter alia, trade or business expenses "if such trade or

business does not consist of the performance of services by the

taxpayer as an employee."   Sec. 62(a)(1).   Congress decided that

allowance of these deductions "above the line" is

     necessary to make as nearly equivalent as practicable
     the concept of adjusted gross income, when that concept
     is applied to different types of taxpayers deriving
     their income from varying sources. Such equivalence is
     necessary for equitable application of a mechanical tax
     table or a standard deduction which does not depend
     upon the source of income. * * * [S. Rept. 885, supra,
     1944 C.B. at 877-878.]

     The Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085,

limited the deductibility of miscellaneous itemized deductions,

allowing their deduction only in excess of 2 percent of adjusted

gross income.   See sec. 67.   In Lickiss v. Commissioner, T.C.

Memo. 1994-103, we held that section 67 did not create an

unconstitutional distinction vis-a-vis the expenses of employees

and of self-employed individuals.    We noted that Congress imposed

the limitation to simplify the enforcement and administrative

aspects of the tax law as well as to ease the recordkeeping

burdens on taxpayers.

     In creating the AMT, Congress sought to correct the "unfair

distribution of tax burden resulting from abuses by individuals

who escaped taxation on certain portions of their income because

of provisions in the tax laws."     Graff v. Commissioner, 74 T.C.

743, 767 (1980), affd. per curiam 673 F.2d 784 (5th Cir. 1982).
                                - 6 -

The AMT would "ensure that high-income individuals and

corporations pay at least a minimum rate of tax on their tax

preferences".    S. Rept. 94-938 (1976), 1976-3 C.B. (Vol. 3) 49,

147.    Such a goal is a legitimate governmental end.    Okin v.

Commissioner, supra at 1342.    Tax Reform Act of 1976, Pub. L. 94-

455, sec. 301(c)(1)(A), 90 Stat. 1520, designated as a tax

preference a portion of an individual's "excess itemized

deductions", including miscellaneous itemized deductions.     See

former secs. 57(a)(1), (b).2   This provision was designed "to

prevent high-income people from using itemized deductions to

avoid all tax liability."    S. Rept. 94-938, supra, 1976-3 C.B.

(Vol. 3) at 150; see H. Rept. 94-658 (1975), 1976-3 C.B. (Vol. 2)

695, 823.

       Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),

Pub. L. 97-248, sec. 201(a), 96 Stat. 411, introduced the concept

of AMTI, calculated by, among other adjustments, reducing

adjusted gross income by "alternative tax itemized deductions".

Sec. 55(b), as amended by TEFRA sec. 201(a), Pub. L. 97-248, 96

Stat. 411.    Absent entirely from the alternative tax itemized

deductions were miscellaneous itemized deductions.      Sec. 55(e),

as amended by TEFRA sec. 201(a), Pub. L. 97-248, 96 Stat. 411.

In making revisions to the AMT, Congress had "one overriding

2
   Currently miscellaneous itemized deductions are not classified
as tax preferences; rather, sec. 56(b) imposes "Adjustments
Applicable to Individuals", including the disallowance of these
deductions.
                               - 7 -

objective: no taxpayer with substantial economic income should be

able to avoid all tax liability by using exclusions, deductions

and credits. * * * The only deductions allowed, other than costs

of producing [investment] income, are for important personal or

unavoidable expenditures * * * or for charitable contributions".

S. Rept. 97-494, at 108 (1982).

     It is apparent that any difference in the AMT treatment of

the expenses of employees and the self-employed is rationally

related to Congress' goal of implementing a broad based tax

system.   As the 1944 legislative history indicates, trade or

business expenses of the self-employed are deductible "above the

line" to achieve parity in treatment with other taxpayers.     The

rationale behind this dichotomy applies with equal force to the

AMT, as the distinction levels the field for employees and the

self-employed for the application of the AMT.    Neither class of

taxpayer may deduct miscellaneous itemized deductions in

calculating AMT.

     Petitioner contends, however, that he is not a high-income

taxpayer.   To a great extent what constitutes a "high-income"

taxpayer or a taxpayer having "substantial economic income" lies

within the eyes of the beholder.   Nonetheless, Congress, in

addition to other adjustments, provided a so-called exemption

amount of $20,000, for married taxpayers filing separate returns,

in computing the amount of the AMT.    Sec. 55(d).   This provides

the statutory parameter, and petitioner falls within that
                               - 8 -

parameter.   As Judge Garth observed in Estate of Kunkel v. United

States, 689 F.2d 408, 416 (3d Cir. 1982):

     It is not for the courts to conduct a more exacting
     inquiry into the "true" purpose of the statute, or to
     ask whether some alternative means would have been more
     closely tailored to achievement of the end sought.

     In sum, to the extent there is a distinction between

employees and self-employed individuals in the application of the

AMT, it is a permissible byproduct of Congress's pursuit of a

legitimate governmental end.   Whether another approach could have

been taken is beyond our limited scope of judicial review of the

determinations made by the legislative branch.

     Based on the foregoing,

                                       Decision will be entered

                               for respondent.
