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The parties agree that the per diem allowances, if paid for
services, would not make any of the employees’ total compensation
unreasonable. Thus, we limit our focus to the second
requirement. Under that requirement, a deduction under section
162(a)(1) turns on the factual determination of whether the facts
and circumstances of the case establish that the payor made the
payment to the payee for services rendered. Sec. 1.162-7(a),
Income Tax Regs. Whether the payor makes the payment to the
payee intending to compensate him or her for services rendered is
a pertinent factor to consider. See, e.g., Paula Constr. Co. v.
Commissioner, 58 T.C. 1055, 1058-1059 (1972), and the cases cited
therein, affd. without published opinion 474 F.2d 1345 (5th Cir.
1973).
We conclude that United paid the per diem allowances to the
employees for services rendered. We reach that conclusion from
the certainty that United would not have paid the per diem
allowances to the employees but for: (1) The bona fide
employer/employee relationship and (2) the need to pay those
allowances in order to secure the employees’ services. The
presence of such a bona fide employment relationship and such a
need to pay per diem allowances in order to secure personal
services is enough under the facts at hand to persuade us that
United paid the per diem allowances to the employees for their
services. Accord Kowalski v. Commissioner, 65 T.C. 44, 52
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