- 27 - in the taxpayer’s former trade or business of being an employee of his former employer.12 It is a well-settled axiom that the touchstone of the employer-employee relationship is the employer’s dominion and control over, or right to control, the services performed by the employee. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992); Gen. Inv. Corp. v. United States, 823 F.2d 337, 341 (9th Cir. 1987). That touchstone is missing when the expense is incurred after the relationship has ended. If the former employee is no longer under the dominion and control of the former employer, the expense cannot be properly characterized as having been “paid or incurred by the employee in connection with the performance of services as an employee of the employer.” In such a case, as in the case at hand, the expense has a “connection” to the employee’s performance of services only in the attenuated or remote sense that the expense can be considered to relate back to, or to have arisen from, the employment relationship. 12Property or services provided to an employee of the employer are excluded from gross income as a working condition fringe benefit under sec. 132(a)(3) to the extent that, if the employee paid for such property or services, the payment would be allowed as a deduction under sec. 162. See sec. 132(d). The regulations under sec. 132 explicitly give “employee” the meaning we find implicit in sec. 62(a)(2)(A): an “employee” for purposes of sec. 132(a)(3), concerning working condition fringe benefits, is “Any individual who is currently employed by the employer.” Sec. 1.132-1(b)(2)(i), Income Tax Regs.Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Next
Last modified: May 25, 2011