UAL Corporation and Subsidiaries - Page 35




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          majority op. p. 7, except perhaps its ultimate conclusion under             
          which millions of dollars of United’s travel expenses become                
          fully deductible in spite of United’s failure to satisfy the                
          substantiation requirements of section 274(d), discussed below.             
               In Am. Airlines, Inc. v. United States, 204 F.3d 1103, 1108            
          (Fed. Cir. 2000), in connection with the ongoing employment tax             
          dispute, the U.S. Court of Appeals for the Federal Circuit                  
          appears to have held that the travel expenses in issue (if, on              
          remand, they are found to have been reasonably expected to be               
          incurred by the airline employees) could not be recharacterized             
          as wage compensation for employment tax withholding purposes.  In           
          this regard, the Court of Appeals for the Federal Circuit relied            
          on and quoted both section 31.3121(a)-1(h) (regarding employment            
          tax withholding) and section 31.3401(a)-1(b)(2) (regarding income           
          tax withholding), Employment Tax Regs., which provide as follows:           

                    � 31.3121(a)-1(h):  Amounts paid specifically–- either            
               as advances or reimbursements–-for traveling or other bona             
               fide ordinary and necessary expenses incurred or reasonably            
               expected to be incurred in the business of the employer are            
               not wages.  Traveling and other reimbursed expenses must be            
               identified either by making a separate payment or by                   
               specifically indicating the separate amounts where both                
               wages and expense allowances are combined in a single                  
               payment.  [Emphasis added.]                                            
                    � 31.3401(a)-1(b)(2):  Traveling and other                        
               expenses.  Amounts paid specifically–-either as                        


               2(...continued)                                                        
          F.2d 876 (5th Cir. 1974); Prince v. Commissioner, T.C. Memo.                
          1997-324.                                                                   





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