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Thank you for allowing me to answer your question. However, I must agree with you that there should be no such limitation on the Schedule C. In doing so, that defeats the whole purpose of the Schedule C, doesn't it? Perhaps the person who reviewed the return at the IRS was not knowledgeable. (I'm sure you know that happens.) Have you tried calling the IRS and speaking to someone to go over the notice of adjustment with you? I have found that sometimes when I call the IRS the person I am speaking to can spot errors made and correct them while I am on the phone. I would still assemble the documentation for the automobile expenses and submit it by the 12/11/12 deadline. Please let me know if I can assist you further. Thank you.
Nothing further needed. I got the answer i was looking for on my own.
I guess you realize that the IRS will disallow expenses to correspond with the income generated, but based on the information you supplied, I was under the impression that you have all of the backup documentation for the expenses. I would appreciate it if you would take a moment to revise your service rating of my answer as this is an important component of being an expert on this website. Thank you.