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.
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.
No deduction for donee means we are taxing that person, presumed to be the earner. Could alternatively consider the donee to be consumer.
We would have same issues of who to tax in a consumption tax system because treatment of gifts depends on definition of “consumption.”
Administrative concerns tip balance in favor of system we have (taxing only donee) because we consider the dollar only when earned, only one tax event to worry about. If donors are generally higher earners, also a revenue maximizing effect. Plus progressivity concerns since most gifts are intra-family.
Gifts in a business context – §162(c)
Duberstein – Cadillac given to business partner. Donor takes deduction, donee excludes as gift. Remanded, found to be a gift on more detailed findings.
“Business overtones” approach, not a common law gift (there was consideration).
Absence of moral or legal obligation doesn’t mean it’s not a gift.
If there is an anticipated benefit, it’s not a gift.
Key is the donor’s intent, objective, motive for the conduct.
Goodwin – minister taxable for cash gifts from churchgoers since couldn’t show that it was out of love and not fear that he would leave parish.