The deduction of state income taxes for Schedule C taxpayers.
Federal tax authorities take the position that state income taxes attributable to sole proprietorship income are not allowable as Schedule C deductions. This position is clearly outlined in Temp. Regs. Sec. 1.62-1T(d), which states that "state taxes on net income are not deductible [in arriving at adjusted gross income (AGI)] even though the taxpayer's income is derived from the conduct of a trade or business." This position is based on the contention that state income taxes are only remotely (and not directly) connected with the trade or business taxes, and thus are only allowable Wayne Lippman as