Fax and E-mail qualify as "documentary evidence" for Sec. 274.

• Author: Cavanaugh, Maureen
• Position: Internal Revenue Code section 274

On Jan. 30, 1998, the IRS issued Letter Ruling 9805007, which held that Regs. Sec. 1.274-5T(c)(2)(iii) does not require original documents to satisfy its requirement for documentary evidence to substantiate travel expenses.

The taxpayer in the ruling was a large corporation that reimbursed its employees for their business travel expenses pursuant to a travel policy that required a completed expense report accompanied by a receipt for expenditures exceeding a certain amount. The travel agent used for these arrangements booked air travel on airlines offering "ticketless travel." When a reservation was made, the travel agent generated an electronic record of the reservation stored in the airline's database, collected payment by cash, check or credit card, and provided the employee with an itinerary and receipt document. The itinerary and receipt contained the employee's name, date of issue, issuing agency or airline, ticket number, flight itinerary (including airline, flight number and flight information) and fare and payment information (including amount, tax, form of payment, credit card, etc.). This itinerary and receipt were sent via e-mail or fax to the employee; no paper ticket or paper receipt was created. The employee submitting an expense report attached to the report a paper copy of the itinerary and receipt document, either the faxed copy or a copy printed from the e-mail.

An employee reimbursed by an employer for deductible expenses incurred as an employee can exclude such reimbursement in determining adjusted gross income if reimbursed under an expense allowance arrangement. Such an arrangement is an accountable plan if the employer's reimbursement arrangement satisfies the requirements of business purpose, substantiation and the requirement to return amounts in excess of expenses. Substantiation requirements for an accountable plan are frequently satisfied by compliance with the requirements set forth in Sec. 274 and its regulations.

Sec. 274 disallows a deduction for...