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return of excess requirement. Sec. 1.62-2(d)-(f), Income Tax
Regs. If an arrangement meets these three requirements, all
amounts paid under the arrangement are, in general, treated as
paid under an accountable plan and are excluded from the
employee's gross income.
Respondent conceded on brief that petitioner was an employee
of Romer during 1993. Respondent argues, however, that the
arrangement does not satisfy the business connection and the
substantiation requirements set out in section 1.62-2(d), Income
Tax Regs., and section 1.62-2(e), Income Tax Regs., respectively.
Business Connection Requirement
Section 1.62-2(d)(1), Income Tax Regs., provides that an
arrangement satisfies the business connection requirement if it:
provides advances, allowances (including per diem
allowances * * *), or reimbursements only for business
expenses that are allowable as deductions by Part VI
(section 161 and the following), subchapter B, chapter
1 of the Code, and that are paid or incurred by the
employee in connection with the performance of services
as an employee of the employer. * * *
Section 162(a) allows a deduction for the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on a trade or business, including the trade or business
of being an employee. Commissioner v. Flowers, 326 U.S. 465
(1946). Section 162(a)(2) allows a deduction for traveling
expenses if the expenses are: (1) Ordinary and necessary; (2)
paid or incurred while away from home; and (3) paid or incurred
in pursuit of a trade or business. Bochner v. Commissioner, 67
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