Ol Llc Case Study
FACTS: OL, an LLC, is reimbursing their mechanics for the cost of their training. If the mechanics have to travel, OL will reimburse their meals and lodging. OL will also reimburse the mechanics for any purchased tools necessary for the business. Each employee is eligible for a maximum reimbursement of $2,000 and must submit documentation to OL to receive the reimbursement.
ISSUES: Are OL new polices on the reimbursement of tools and training deductible as equipment and training expenses under an accountable plan, or as compensation under a nonaccountable plan?
CONCLUSION: OL has an accountable reimbursement plan; therefore, the tools are deductible as equipment and the training costs are deductible as training expenses.
ANALYSIS: Reg. §1.62-2(c)(1) defines an accountable plan as meeting three criteria: expenses shall be business related activities, expenses must be substantiated to the employer, and any excess reimbursement should be returned to the employer. The reimbursement of tools and training meets the three criteria to be considered an accountable plan because the mechanics cannot receive any reimbursement over $2000; therefore, it is not possible for them to receive excess reimbursements.
IRC Sec.§162(a) says “there shall be allowed as a deduction …show more content…
§1.62-2(c)(2)(ii), accountable plans are deductible as a general business expense. Supplies are often considered a miscellaneous account; therefore, Jones should classify the reimbursement for tools as an equipment deduction. Jones shall classify the reimbursement of tuition, meals, and lodging as deductible training expenses. PLR 200930029 gives a similar factual situation to OL. PLR 200930029 has a taxpayer requesting the proper treatment of payments to service technicians for tools, equipment and training. The taxpayer finds that their reimbursement arrangement for the technicians satisfies an accountable plan. Therefore, OL’s new policies meet the requirements to be an accountable
ISSUES: Are OL new polices on the reimbursement of tools and training deductible as equipment and training expenses under an accountable plan, or as compensation under a nonaccountable plan?
CONCLUSION: OL has an accountable reimbursement plan; therefore, the tools are deductible as equipment and the training costs are deductible as training expenses.
ANALYSIS: Reg. §1.62-2(c)(1) defines an accountable plan as meeting three criteria: expenses shall be business related activities, expenses must be substantiated to the employer, and any excess reimbursement should be returned to the employer. The reimbursement of tools and training meets the three criteria to be considered an accountable plan because the mechanics cannot receive any reimbursement over $2000; therefore, it is not possible for them to receive excess reimbursements.
IRC Sec.§162(a) says “there shall be allowed as a deduction …show more content…
§1.62-2(c)(2)(ii), accountable plans are deductible as a general business expense. Supplies are often considered a miscellaneous account; therefore, Jones should classify the reimbursement for tools as an equipment deduction. Jones shall classify the reimbursement of tuition, meals, and lodging as deductible training expenses. PLR 200930029 gives a similar factual situation to OL. PLR 200930029 has a taxpayer requesting the proper treatment of payments to service technicians for tools, equipment and training. The taxpayer finds that their reimbursement arrangement for the technicians satisfies an accountable plan. Therefore, OL’s new policies meet the requirements to be an accountable