Steven J. and Terry L. Namyst - Page 14

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          expenses.  However, because petitioners have not shown that the             
          reimbursement arrangement satisfied all three of the requirements           
          of section 1.62-2, it did not qualify as an accountable plan                
          under section 62(a)(2)(A) and section 1.62-2(c), Income Tax Regs.           
          Therefore, the amounts petitioner received from IMC in the last 9           
          months of 1996, and in 1997, 1998, and 1999, in excess of the               
          amounts IMC paid for petitioner’s tools as described below,                 
          should be included in petitioners’ gross income in those years as           
          compensation.                                                               
          II. Expenses Paid in 1994 and 1995                                          
               Petitioners argue that expenditures of $10,393.90 petitioner           
          made in 1994 and 1995 were properly excludable from their gross             
          income in the years covered by the accountable plan, because the            
          amounts were repaid as part of an accountable plan.  IMC paid               
          petitioner a salary in 1994 and 1995 but did not reimburse him              
          for expenses during those years.2  Because we have found that the           
          arrangement between petitioner and Mr. Kerkinni did not qualify             
          as an accountable plan in 1996, 1997, 1998, or 1999, petitioner’s           
          expenses in 1994 and 1995 were not part of an accountable plan in           
          any year.                                                                   




               2The record does not show whether petitioners claimed these            
          expenses as miscellaneous itemized deductions from their adjusted           
          gross income in 1994 and 1995.                                              





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