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Nashville residence, petitioner has also failed to establish
entitlement to deductible business expenses. From evidence in
the record, it appears that in 1991 Flagship Airlines used the
per diem substantiation method to reimburse petitioner $2,848 in
travel expenses under an accountable plan, within the meaning of
section 1.62-2(c)(2), Income Tax Regs.22 Amounts treated as paid
to an employee under an accountable plan are excluded from the
employee’s income. See sec. 1.62-2(c)(4), Income Tax Regs.
Accordingly, no deduction is allowed with respect to such
reimbursed expenses. If the employer reimbursement is less than
the deductible business expenses the employee incurred on behalf
of his employer, deductibility of the excess business expenses by
the employee is subject to the heightened substantiation
requirements of section 274(d). See sec. 1.274-5T(f)(2)(iii),
Temporary Income Tax Regs, 50 Fed. Reg. 46028 (Nov. 6, 1985).
With respect to the business travel for which Flagship
Airlines made reimbursements, petitioner has failed to
substantiate that he incurred deductible business expenses in
excess of the reimbursements. Accordingly, petitioner is
entitled to no deduction with respect to such travel.
22 The Form W-2 petitioner received from Flagship Airlines
for taxable year 1991 listed $2,848 in Box 17 of the form and
used the designation “Code L”. The “Code L” designation is used
in Box 17 to report employee expense payments made under an
accountable plan, where the payment is equal to “government
specified rates”, such as the per diem substantiation method.
See 1991 Instructions for Forms W-2 and W-2P.
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