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Benaglia v. Commissioner - 36 B.T.A. 838 (1937)

Rule:

The value of meals and lodging is not income to the employee, even though it may relieve him of an expense which he would otherwise bear.

Facts:

Petitioners husband and wife were residing in Honolulu, Hawaii, where they filed joint income tax returns for 1933 and 1934. Petitioner husband was employed as the manager in full charge of the several hotels in Honolulu. Petitioner was constantly on duty, and, for the proper performance of his duties and entirely for the convenience of his employer, he and his wife occupied a suite of rooms in the Royal Hawaiian Hotel and received their meals at and from the hotel. Neither petitioner nor his employer ever regarded the meals and lodging as part of his compensation or accounted for them. The Commissioner has added $7,845 each year to the petitioner's gross income as "compensation received from Hawaiian Hotels, Ltd.", holding that this was "the fair market value of rooms and meals furnished by the employer." Consequently, the Commissioner determined a deficiency in the petitioners’ joint income tax. Petitioner argued that the value of the rooms and meals should not be included as part of his taxable income.

Issue:

Should the value of the rooms and meals provided by the employer to the petitioner be included in petitioner’s taxable income?

Answer:

No.

Conclusion:

The Court held that based on the evidence, the petitioner’s residence at the hotel was not by way of compensation for his services, not for his personal convenience, comfort or pleasure, but solely because he could not otherwise perform the services required of him. According to the Court, under such circumstances, the value of meals and lodging was not income to the employee, even though it may relieve him of an expense which he would otherwise bear. The advantage to him was merely an incident of the performance of his duty, but its character for tax purposes was controlled by the dominant fact that the occupation of the premises was imposed upon him for the convenience of the employer.

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