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characterization of those allowances as personal service
compensation. We adopt that characterization.
We conclude by noting that the parties are currently
litigating in the United States Court of Federal Claims the issue
of whether the very same per diem allowances are wages for
employment tax purposes. See United Air Lines, Inc. v. United
States, No. 97-173T (Fed. Cl., filed Mar. 18, 1997).
Interestingly, the Government is arguing that those allowances
are wages for employment tax purposes. Wages for employment tax
purposes are “all remuneration for employment, including the cash
value of all remuneration (including benefits) paid in any medium
other than cash”. Sec. 3121(a). Section 3401 defines wages in
similar terms.
We hold that United may deduct the per diem allowances under
section 162(a)(1) as personal service compensation. Accordingly,
Decision will be entered
under Rule 155.
Reviewed by the Court.
WELLS, CHABOT, GERBER, RUWE, HALPERN, FOLEY, VASQUEZ, and
GALE, JJ., agree with this majority opinion.
WHALEN, J., concurs.
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