- 11 - (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).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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