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requirement “if it requires each business expense to be
substantiated to the payor in accordance with paragraph (e)(2)
[relating to expenses governed by section 274(d)] or (e)(3)
[relating to expenses not governed by section 274(d)]”. In
pertinent part, section 1.62-2(e)(3), Income Tax Regs.
(applicable to this case), provides:
An arrangement that reimburses business expenses * * *
meets the requirements of this paragraph (e)(3) if
information is submitted to the payor sufficient to
enable the payor to identify the specific nature of
each expense and to conclude that the expense is
attributable to the payor’s business activities.
Therefore, each of the elements of an expenditure * * *
must be substantiated to the payor. It is not
sufficient if an employee merely aggregates expenses
into broad categories (such as “travel”) or reports
individual expenses through the use of vague,
nondescriptive terms (such as “miscellaneous business
expenses”). See � 1.162-17(b).
While section 1.62-2(e)(1), Income Tax Regs., appears to set
forth a precondition, i.e., that an arrangement specifically
require substantiation, section 1.62-2(e)(3), Income Tax Regs.,
seems to require action, i.e., that certain information actually
be submitted to the payor in accordance with the aforementioned
requirement. We assume that, to satisfy the substantiation
requirement, the arrangement must require that the information
called for by subparagraph (3) be submitted and that, for an
amount to be paid pursuant to a reimbursement arrangement, such
information must actually be submitted in accordance with such
requirement. See sec. 1.162-17(b), Income Tax Regs. (employee
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