The opinion
Johnson, J., dissenting: I find myself unable to agree with the majority holding that the value of the meals consumed by petitioner was not includible in his gross income. It is apparent from the findings that the partnership did not eliminate from its cost of goods sold tbe cost of the food furnished to petitioner, an owner and partner. But it was clearly improper to include the cost of this food in cost of goods sold, since it was never sold. The cost of goods sold having thus been erroneously inflated, the gross income from the business reported by the partnership was thus erroneously diminished. The proper adjustment was to restore the value of these meals to partnership gross income and to increase petitioner’s distributive income from the partnership accordingly, as respondent did. P. P. Sweeten, 3 B. T. A. 37; Fellipo Dicenso, 11 B. T. A. 620; O. D. 998, 5 C. B. 86.
The majority opinion, however, urges that if the cost of petitioner’s meals was “erroneously deducted or subtracted in any case, that error does not make income. The correction logically must be a disallowance of the improper reduction.” But cost of goods sold is not a deduction from gross income and hence not, strictly speaking, a deduction at all. Rather it is an item which is subtracted from total receipts of a business in arriving at the gross income subject to taxation under the Sixteenth Amendment, before statutory deductions. Thus an error in gross income, whether arising from an error in computing total receipts or cost of goods sold, can only be “disallowed” by correcting gross income by the amount of the error.
Nor do I agree with the suggestion of the majority opinion, though the question is not at issue, that owners who through business necessity eat their meals on the premises of their establishments should be allowed to consider the expenses thereof as ordinary and necessary business expense. Such living expenses are invariably personal and nondeductible, no matter where incurred, except to those in a travel status. Section 24(a) (1), Internal Revenue Code. Similarly, the partnership should not be entitled to deduct depreciation or maintenance on rental property converted to personal use by a partner, such as the apartment used by petitioner here.
I think that the majority is correct in its holding, following Helvering v. Independent Life Ins. Co., 292 U. S. 371 , that the rental value of the apartment owned and occupied by petitioner does not constitute taxable income to him.