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expenditures for nonovernight day trips are personal expenses of
the employees, rather than business travel expenses. United
States v. Correll, 389 U.S. 299 (1967).2 It therefore appears
that United intended to pay the allowances to its employees to
cover their personal expenses incurred during day trips. In
Commissioner v. Kowalski, 434 U.S. 77 (1977), the Supreme Court
held that cash meal payments to an employee were includable in
the employee’s gross income. The Supreme Court noted “the
presumptively compensatory nature of cash payments”. Id. at 94;
see Bank of Stockton v. Commissioner, T.C. Memo. 1977-24
(indicating that if payments made to enable employees’ wives to
attend conventions were not deductible as either noncompensatory
business expenses or dividends, then the only reasonable
conclusion would be that the payments were in the nature of
additional compensation to the employees and, unless unreasonable
in amount, would be deductible as compensation); Anchor Natl.
Life Ins. Co. v. Commissioner, 93 T.C. 382, 433 and n.30 (1989)
1(...continued)
that the type of incidental expenses that were contemplated in
structuring the per diem allowances were incurred on day trips.
See infra p. 21.
2Based on United States v. Correll, 389 U.S. 299 (1967),
petitioner has conceded that the day trip allowances were not for
travel expenses because its employees’ day trip expenses were not
incurred during overnight travel. Both parties now agree that
the only issue regarding day trip allowances is whether they
constitute compensation to United’s employees.
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