UAL Corporation and Subsidiaries - Page 11




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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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