- 15 - 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”.Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
Last modified: May 25, 2011