- 40 -40
treated such expenses in the manner provided
in paragraph (2) [of section 274(e)], or
(B) where the services are performed for
a person other than an employer, only if the
taxpayer accounts (to the extent provided by
subsection (d) [of section 274]) to such
person.
The regulations elaborating on the section 274(e)(3) excep-
tions provide in pertinent part:
In the case of any expenditure * * * paid or incurred
by one person in connection with the performance by him
of services for another person (whether or not such
other person is an employer) under a reimbursement or
other expense allowance arrangement, the limitations on
allowability of deductions provided for in * * * this
section shall be applied only once, either (1) to the
person who makes the expenditure or (2) to the person
who actually bears the expense, but not to both. * * *
Sec. 1.274-2(f)(2)(iv)(a), Income Tax Regs.
It is petitioner’s position that Beech Trucking Co. v.
Commissioner, 118 T.C. 428 (2002), requires the Court to hold in
the instant case that
In the case of a three-party arrangement in which
a professional employer organization leases truck
drivers to trucking companies, * * * the party which is
subject to the Section 274(n) limitation * * * is the
common-law employer of the truck drivers.
According to petitioner, under Beech Trucking Co. v. Commis-
sioner, supra, TLC was not the employer34 of any driver-employee
and thus is not subject to the section 274(n)(1) limitation on
34We accord the term “employer” the same meaning as the term
“common-law employer”. For convenience, we shall use only the
term “employer”.
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