Andrew S. and Linda Hayworth Brenner - Page 13

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               as a reimbursement or other expense allowance                          
               arrangement if--                                                       
                    (1) such arrangement does not require the                         
                    employee to substantiate the expenses covered by                  
                    the arrangement to the person providing the                       
                    reimbursement, or                                                 
                    (2) such arrangement provides the employee the                    
                    right to retain any amount in excess of the                       
                    substantiated expenses covered under the                          
               C.  Section 1.62-2, Income Tax Regs.                                   
                    1.  Overview                                                      
               In pertinent part, section 1.62-2(c)(1), Income Tax Regs.,             
          provides: “[T]he phrase * * * [reimbursement arrangement] means             
          an arrangement that meets the requirements of paragraphs (d)                
          (business connection), (e) (substantiation), and (f) (returning             
          amounts in excess of expenses) of this section.”  In pertinent              
          part, section 1.62-2(c)(2)(i), Income Tax Regs., provides that,             
          if an arrangement meets those requirements, “all amounts paid               
          under * * * [it] are treated as paid under an ‘accountable plan’”           
          (accountable plan).  In pertinent part, subdivision (ii) of that            
          section provides that “only the amounts paid under the                      
          arrangement that are not in excess of the substantiated expenses            
          are treated as paid under an accountable plan.”  Payments under             
          an arrangement that does not satisfy one or more of the                     
          requirements of paragraphs (d), (e), or (f) are treated as paid             
          under a “nonaccountable plan” (nonaccountable plan), and, even if           
          the arrangement satisfies those requirements, payments “in excess           

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