Revenue – primary goal

§119 – Meals and Lodging –

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§119 – Meals and Lodging – furnished for the convenience of the employer on the employer’s business premises (meals) or as condition of employment on the premises (lodging).

  • Lodging

    • Three tests:

    • Adams v. US – Court allowed deduction for company-owned house in Japan though not on company’s grounds – convenience of employer.

      • Court reluctant to expand “on the business premises” beyond the confines of the employer’s primary place of business.

      • Here, however, residence was built and owned by employer, designed to accommodate business activities of employer, business activities held there after hours, and it served important business function.

    • On campus housing not on the premises (Winchell) but hotel manager’s house across the street from hotel is (Lindemann). “Significant portion of business” test.

  • Meals

    • In-kind vs. reimbursement – Commissioner v. Kowalski – cash meal allowance to troopers were not for the convenience of the employer. Not necessary for performance of duties. Dissent says statute does not distinguish between cash and in-kind. Cf. Christey p.94.

    • Only 50% deductible – §274(n) – unless they are a de minimis fringe under §132(a)(4) and (e)(2) (eating facilities on premises for profit).

    • Meals excluded under §119 are de minimis fringe under (e)(2) are fully deductible by employers. (??)

    • Under §119(b)(4) if more than half of employees have on-premises meals for convenience of employer then all employees on the premises can have the exclusion.

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