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accuracy-related penalty under section 6662(a) for each year in
issue.
OPINION
Petitioners argue that the checks issued to petitioner by
IMC between March 1996 and December 1999 were not wages, but were
in part reimbursements for the expenses petitioner paid in 1994,
1995, 1996, 1997, 1998, and 1999, and in part proceeds from the
sale of petitioner’s tools to IMC. With respect to the expenses
petitioner paid, petitioners claim that the reimbursement
arrangement between petitioner and Mr. Kerkinni qualifies as an
“accountable plan” under section 1.62-2(c)(2)(i), Income Tax
Regs., and that petitioners were not required to include the
amounts of the expense reimbursements in their gross income.
Petitioners also argue that petitioner sold his old tools to IMC
at reasonable used values set by petitioner totaling $23,919.50,
and that the amounts that represented the proceeds from these
sales were returns of petitioner’s capital and not includable in
gross income.
Respondent argues that it is unreasonable to believe that
petitioner agreed to work for IMC without a salary or an
ownership interest in the corporation. Although the arrangement
was unusual, we reject respondent’s contention. Petitioner is
dedicated to his work and loyal to his friend, Mr. Kerkinni.
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