Class 4 § 119 suggested analysis.pdf

Class 4 § 119 suggested analysis.pdf - SECTION V 119 MEALS...

Info icon This preview shows pages 1–3. Sign up to view the full content.

SECTION V § 119: MEALS AND LODGING SUGGESTED ANALYSIS 1. Sydney is employed by Condo Corp. to supervise the operations of one of their large condominium complexes in Beverly Hills. Sydney is on call 24 hours a day, Tuesday through Saturday. As a condition of employment, Sydney and his family are required to live in one of the condominiums at the site. What are the tax consequences to Sydney if the rental value of the condominium is $24,000 a year but Sydney is not required to pay anything? His annual salary from Condo Corp is $100,000. Meals and lodging furnished by an employer to an employee are additional compensation to the employee under the broad sweep of §61. Treas. Reg. § 1.61-2(d)(3). However, under § 119, the income will be excluded if the employer has a substantial noncompensatory reason for providing the meals or lodging. Section 119 specifically excludes the value of meals and lodging furnished to an employee if they are: 1) provided by an employer to an employee; 2) offered “for the convenience of the employer;” 3) furnished “on the business premises of the employer,” and 4) in the case of lodging, the lodging is required to be accepted by the employee “as a condition of employment.” In one of the great understatements, the Supreme Court in Commissioner v. Kowalski states: “The convenience of the employer doctrine is not a tidy one.” Whether something is furnished for the convenience of the employer is a question of fact. Treas. Reg. §§ 1.119-1(a)(1), (b). The test is generally whether or not the employee could properly carry out his duties if the lodging or meals were not supplied. Here Sydney is on call 24 hours a day. This is one of the situations that Treas. Reg. § 1.119-1(b) lists as an example of the convenience of the employer The “on the business premises” test has its own levels of complexity. In Anderson , taxpayer was the manager of a motel. For a while taxpayer, his wife and 3 kids lived at the motel. The employer was convinced Anderson needed something larger, so the employer bought a house “two short blocks” from the hotel for Anderson to live in. The court held that being two short blocks away was not “on” the premises.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

In Lindeman , taxpayer was the manager of a hotel. The hotel also owned land across the street from the hotel which it used for overflow parking. Taxpayer originally lived at the hotel itself but then moved to a house on the land across the street. The court held that the house was on the business premises on two grounds: First it determined that since the lot was contiguous to the hotel and used by the hotel, it was part of the hotel’s premises even though across the street. Second, and perhaps more importantly, the court held that Lindeman performed significant duties from the home which turned the home into part of the business premises.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.
  • Fall '10
  • West
  • Macroeconomics, Supreme Court of the United States, Condominium, Apartment, employer

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern