Transport Labor Contract/Leasing, Inc. & Subsidiaries - Page 40

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                    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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