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included in the shareholder's gross income on his
return * * *
Interpreting the word "included" to mean "reported by" or
"actually used in computing the tax liability of" any employee or
independent contractor would establish a statutory requirement
that would be impractical and in many cases impossible for
employers to meet. Deductions are a matter of legislative grace,
and a taxpayer is required to meet all of the statutory
requirements before taking a deduction. Employers would not be
able to take a deduction until they first ascertained that their
employees and independent contractors had filed an income tax
return and reported the item as gross income. How could
employers know that employees and independent contractors had
actually filed returns and reported the property transfers as
income before taking a deduction? Indeed, in many situations the
employer's return would be due before the due date of the service
providers' returns.7 Even the majority acknowledges that its
interpretation sets up an impractical requirement that the
majority believes justifies "employer friendly" regulations that
are at variance with the majority's own interpretation of the
statutory requirements.
7Most individual employees file returns on a calendar year
basis, in which case their returns are due on April 15.
Employers are often corporations filing returns on the basis of a
fiscal year. Even those corporations filing returns on a
calendar year basis are, absent extensions, required to file
returns on March 15. See sec. 6072.
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