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(citing Bank of Stockton v. Commissioner, supra, for the
proposition that disallowed business expenses may be deductible
as additional compensation to employees if the compensation does
not exceed the bounds of reasonableness). In the instant case,
the per diem allowances for day trips were for personal expenses
of United’s employees and should be treated as compensation to
the employees.3
Respondent argues that United did not have the requisite
compensatory intent at the time it paid the allowances. However,
3Although not in effect for the years in issue, sec. 1.62-
2(j), Example (2), Income Tax Regs., confirms this as the proper
treatment. In his dissenting opinion, see infra p. 38 note 3,
Judge Swift erroneously cites sec. 262 and United States v.
Correll, supra, to support his belief that United’s allowance for
its employees’ day trip meal expenses is nondeductible because
such payments were for personal living expenses of United’s
employees. However, sec. 262 only disallows the personal
expenses of the “taxpayer”. Sec. 1.262-1, Income Tax Regs.
Here, UAL is the “taxpayer”. The day trip meal expenses were
“personal expenses” of its employees, not personal expenses of
United. The “taxpayer” in United States v. Correll, supra, was
not a corporation or an employer, but was an individual taxpayer
who was attempting to deduct his own personal expenditures for
meals during nonovernight travel. The Supreme Court was not
faced with, nor did it discuss, the issue of whether an
employer’s payment of its employees’ personal expenses could be
deducted by the employer. On the other hand, in Ginsburg v.
Commissioner, T.C. Memo. 1994-272, Judge Swift himself recognized
that payment of an individual’s personal expenses by a
corporation can be deducted by the corporation if the payment is
in the nature of compensation. See Fred W. Amend Co. v.
Commissioner, 55 T.C. 320, 327-328 (1970), affd. 454 F.2d 399
(7th Cir. 1971).
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