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Petitioner AJF concedes that checks which were cashed by
Ferrentino, received from Custom Decorating for delivery
services, should have been included in AJF's gross income.
However, petitioners argue that the fuel reimbursements are not
includable in gross receipts of AJF, and the proceeds from
Ferrentino's check cashing are not includable in his gross income
because he used the proceeds to pay "casual labor" for
performance of services for which the checks were issued,
entitling him to deduct such amounts from gross income resulting
in no underpayment.
1. Fuel Reimbursement Checks
The first question is whether the fuel reimbursement checks
should be included in AJF's gross income. Section 61(a) defines
the term "gross income" as "all income from whatever source
derived", except as otherwise provided by law. Income has been
defined as "undeniable accessions to wealth, clearly realized,
and over which the taxpayers have complete dominion."
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955).
Unless specifically excluded by another provision of the Internal
Revenue Code, all income is subject to tax. Id. at 430.
Therefore, reimbursed expenses must be included in gross income,
but these expenses may be deducted only if allowed under other
provisions of the Internal Revenue Code and if adequately
substantiated. Rietzke v. Commissioner, 40 T.C. 443, 453 (1963);
Vaughn v. Commissioner, T.C. Memo. 1992-317, affd. without
published opinion 15 F.3d 1095 (9th Cir. 1993).
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