Andrew S. and Linda Hayworth Brenner - Page 15

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          XIII may still qualify as an accountable plan with respect to               
          Nomura employees other than petitioner.                                     
                    2.  Application to Petitioner’s Legal Fees                        
                    a.  Business Connection                                           
               A reimbursement arrangement satisfies the business                     
          connection requirement if it is limited to reimbursement for                
          deductible business expenses “that are paid or incurred by the              
          employee in connection with the performance of services as an               
          employee of the employer.”  See sec. 1.62-2(d)(1), Income Tax               
          Regs.  In this case, the reimbursed legal fees relate to actions            
          and proceedings that arose out of petitioner’s prior employment             
          with Nomura and, specifically, to Nomura’s termination of that              
          employment.  As such, they satisfy the business connection                  
          requirement.  See Alexander v. Commissioner, 72 F.3d 938, 945               
          (1st Cir. 1995), affg. T.C. Memo. 1995-51; McKay v. Commissioner,           
          102 T.C. 465, 489 (1994), vacated and remanded on another issue             
          without published opinion 84 F.3d 433 (5th Cir. 1996).3                     
                    b.  Substantiation                                                
                    (1)  Introduction                                                 
               Under section 1.62-2(e)(1), Income Tax Regs., an arrangement           
          that reimburses business expenses meets the substantiation                  

               3  For purposes of discussion, we accept as satisfied a                
          second requirement of sec. 1.62-2(d)(1), Income Tax Regs., that             
          the business expense reimbursement be “identified” where, as in             
          this case, “both wages and the reimbursement * * * are combined             
          in a single payment”.                                                       

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