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interpretation of section 83(h) is the same as that of the
majority. This is shown by the preamble to the 1995 regulations
which states in part:
Because of the potential difficulty of
demonstrating actual inclusion by the service provider,
a special rule provides that, if the service recipient
timely complies with applicable Form W-2 or 1099
reporting requirements under section 6041 (or 6041A),
as appropriate, with respect to the amount includible
in income by the service provider, the service provider
is deemed to have included the amount in gross income
for this purpose. * * * [T.D. 8599, 1995-2 C.B. 13.]
A safe harbor is needed only if the interpretation of the
majority is correct. This is so because the purpose of the safe
harbor is to ease an employer's potential difficulty of proving
that an employee actually included the fair market value of
property in income.
If Judge Ruwe's reading of the regulations in effect from
1978 to 1995 (i.e., that an employer may deduct the fair market
value of property given to an employee whether or not the
employee includes that property in income) is correct, then the
1995 regulations are a total reversal in position by the IRS.
The preamble to the 1995 regulations indicates that this
interpretation is incorrect. The IRS did not reverse its
position on this fundamental issue. T.D. 8599, 1995-2 C.B. at
12-13. In describing the regulations in effect from 1978 to
1995, the preamble states:
In light of the difficulty that a service recipient may
have in demonstrating that an amount has actually been
included in the service provider's gross income, the
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