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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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