Benaglia v. Commissioner

*839 OPINION.

Sternhagen :

The Commissioner has added $7,845 each year to the petitioner’s gross income as “compensation received from Hawaiian Hotels, Ltd.”, holding- that this is “the fair market value of rooms and meals furnished by the employer.” In the deficiency notice he cites article 52 [53], Regulations 77, and holds inapplicable Jones v. United States, 60 Ct. Cls. 552; I. T. 2232; G. C. M. 14710; and G. C. M. 14836. The deficiency notice seems to hold that the rooms and meals were not in fact supplied “merely as a convenience to the hotels” of the employer..

From the evidence, there remains no room for doubt that 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. The evidence of both the employer and employee shows in detail what petitioner’s duties were and why his residence in the hotel was necessary. His duty was continuous and required his presence at a moment’s call. He had a lifelong experience in hotel management and operation in the United States, Canada, and elsewhere, and testified that the functions of the manager could not *840 have been performed by one living outside the hotel, especially a resort hotel such as this. The demands and requirements of guests are numerous, various, and unpredictable, and affect the meals, the rooms, the entertainment, and everything else about the hotel. The manager must be alert to all these things day and night. He would not consider undertaking the job and the owners of the hotel would not consider employing a manager unless he lived there. This was implicit throughout his employment, and when his compensation was changed from time to time no mention was ever made of it. Both took it for granted. The corporation’s books carried no accounting for the petitioner’s meals, rooms, or service.

Under such circumstances, 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. In Jones v. United States, supra, the subject was fully considered in determining that neither the value of quarters nor the amount received as commutation of quarters by an Army officer is included within his taxable income. There is also a full discussion in the English case of Tennant v. Smith, H. L. (1892) App. Cas. 150, III British Tax Cases 158. 2 A bank employee was required to live in quarters located in the bank building, and it was held that the value of such lodging was not taxable income. 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. The Bureau of Internal Revenue has almost consistently applied the same doctrine in its published rulings. 3

The three cases cited by the respondent, Ralph Kitchen, 11 B. T. A. 855; Charles A. Frueauf, 30 B. T. A. 449; and Fontaine Fox, 30 B. T. A. 451, are distinguishable entirely upon the ground that what the taxpayer received was not shown to be primarily for the need or convenience of the employer. Of course, as in the Kitchen case, it can not be said as a categorical proposition of law that, whore an employee is fed and lodged by his employer, no part of the value of such perquisite is income. If the Commissioner finds that it was received as compensation and holds it to be taxable income, the taxpayer contesting this before the Board must prove by evidence that it is not income. In the Kitchen case the Board held that the evidence did not establish that the food and lodging *841 wore given for the convenience of the employer. In the present case the evidence clearly establishes that fact, and it has been so found.

The determination of the Commissioner on the point in issue is reversed.

Reviewed by the Board.

Judgment will be entered under Rule 50.

Murdock concurs only in the result.

This decision has only been cited in the later English reports on another point, and seems therefore to be still good law.

O. D. 265, 1 C. B. 71; O. D. 814, 4 C. B. 84; O. D. 915, 4 C. B. 85 ; I. T. 2232, IV-2 C. B. 144; I. T. 2253, V-l C. B. 32; G. C. M. 12300, XII-2 C. B. 30; G. C. M. 14710, XIV-1 C. B. 44; G. C. M. 14836, XIV-1 C. B. 45 ; G. C. M. 18430, XVI C. B. 22-8733 : Cf. O. D. 1135, 5 C. B. 174 : I. T. 3022. XV-2 C. B. 76.