# Appendix — Anderson v. Commissioner > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_0425%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1967 - **Citation:** 387 U.S. 906 ## Text ° . — Worn hres alla uae Sl ati ‘ . "APPENDIX A sg No. 16389 - United States Court of hapeals, FOR THE SIXTH CIRCUIT. Comnassiowen OF Fadeauss Revexve,) Bi gah é Petitioner, | On Petfrion for AW SS3N _ .> |, Review of the ; SR ag | (By bh Decision of ‘the Cuartas N. ANDERSON and Tax Court of the. Grace M. ANDERSON, = “United States. * * , Ba) : , Respondents. J ati Decided December 23, rf ac Before: McAtsasrm, Senior Circuit, J des, ‘CELEBREZZE, | Cireuit Judge, and Wilson, District Judge’. Wnuson, District Judge. This case“ ‘comes before the Court upon the petition of the Commissioner ‘tf Internal Revenue seeking a review of the decision of the Tax Court Of the United States. The Tax Court held, among other ~ things, that the value of: meals and lodging furnished the ‘ taxpayer by his employer was properly excluded by the _ taxpayer from gross income under the provisions of Séc- - tion 119 of the Internal Revenue Code of 1954. (26 U.S.C. . ' 1958 ed., Sec. 119) The facts, as found by the Tax Court’ are not here disputed. The Commissioner does insist, how- ever, that the Tax Court was in error in construing that | portion of the statute which requires that meals and lodg- _ ing be furnished “fon the business premises of the.em- — : * Frank W. Wilson, District Ju e, Eastern District of ennessee, ae sitting by designation. -” i ah / / & 2a sg Court of Appeals Opimion a. ployer” as.a 5 condition to their — being excluded from gross income in determining the taxpayer’ s income tax > liability. Thus, the single issue presented upon this — is one of statutory construction. The facts as found by the Tax Court, and insofar as réle- vant to- the issue presented upon this pens for review, areas follows: _ 6. - Charles N. Anderson, herein referred to as the taxpayer, was employed by the Lincoln Lodge. Corporation as, the -manager of the Lincoln Lodge, a motel located in Colum- . bus, Ohio, such employment beginning upon the date of the motel’s opening on July 1, “1956, and continuing through the years 1958, 1959 and 1960, which form the three tax- able years here involved. During the first. year of opera- tion, the taxpayer, his wife and three children lived in the motel in a two-room combination livingroom, bedroom, and _ kitghen suite. The unsatisfactory nature of such crowded quarters as a family residence was shortly called to the _ employer’s attention. After considering the-loss of revenue . occasioned by the taxpayer’s occupying the additional space _within the niotel, the employer decided to look for a house - close by and move the taxpayer and his family out of the motel. The ‘taxpayér’s preference for’a home some several blocks; from the motel was rejected by the employer, who desired for business reasons to keep its motel manager as Glose to the motel as possible. The employer considered, ' but likewise rejected, building a new residence upon the __ motel property, inasmuch as that land was.considered by ~__ the employer to. be too valuable for such a use. A lot’was _ . - finally selected at 191 Schoolhouse Lane in nearby Lincoln _ + Village, the lot being described as ‘‘two short blocks’’ from © ' the motel, and being the closést respec, property zoned EP A Court of Appeals Opinion . 3a for single residence. The property was paid for by Lincoln Lodge Corporation. The Corporation also paid for the con- struction of afgingle family residence thereon. For reasons not here relevant, title to the property was. initially taken in the taxpayer’s name, and later transferred to the name of Lincoln Lodge Corporation, but no issue exists but that. the employer furnished all funds for the purchase and con- - struction of the residence and was the owner of the prop- erty at all times and for all purposes relevant to this Jaw- suit. The taxpayer,.as manager of the Lincoln Lodge, was required by his employer to be available upon a 24 hour ‘ a day basis in order to oversee the management and opera- tion of the motgl. For this reason. he was required by his employer, as a condition of his employment, to live in the ‘house at 191 Schoolhouse Lane, which was déscribed as being approximatély a four minute walk or a two minute drive from the main lobby of the motel or, as stated above, ‘‘two short blocks’? from the motel. Upon completion’ of - eonstraction of the house in J uly of 1957, .the taxpayer- and his family moved into it. The home was provided by the employer without cost to the taxpayer. The employer — also paid all utilities at the home, as well.as all laundry, — . dry cleaning, and cleaning expenses.-Additionally, the em- ployer furnished the taxpayer’s family with milk and cer- tain staple groceries without cost to the taxpayer. _ The Tax Court found the fait rental value of the resi- dence to be in the sum.of $1920.00 per year, the value of . ' utilities furnished to be in the sum of $600.00 per year, thé value of laundry, dry cleaning, and cleaning’ services to be in the sum of $600.00 per year and the value of milk and’ staple groceries furnished to be in the sum of $300.00: per year. These values are not here in dispute. Thus, for each ce Seal _ Court of =—_ bf snot a ’ of the three tax years here involved the value of meals fur- _ nished the taxpayer by his employer was in the sum of . $300.00 per year and value of lodging was in the sum of $3120.00. No issue is here raised by the Commissioner with refer- ence to the conclusions of the Tax Court that the meals and lodging were furnished for the convenience of the employer and the conclusion that the taxpayer was required to accept the lodging as a condition of his employment: Rather, it is ° . the conclusion of the-Tax Court that the meals were fur- _nished and the lodging provided ‘‘on the business premises . ' of’the employer’’, and were thus properly excludable from gross income by the taxpayer for the years 1958, 1959 and 1960 that forms the issue yar upon this Petition for Review. Section 61 of the Internal Revenue Code of 1954 defines gross income as ‘‘.. . all income from whatever source derived, including . . . compensation for. services’’. (26 U.S.C. 1958 ed., See. 61) The relevant Treasury regulations in this regard provide that, ‘‘If services are paid for other than in money, the fair market valge of the property or services taken in payment must be included in income.’’ (26 C.F.R., See. 1.61-2(d)] ; It is thus obvious that the value of meals and edging re- ceived by the taxpayer in return for his services as man- ager of the motel would properly be includable in his gross - income. for the tax ‘years involved unless excluded under another provision of the 1954 Code. See Commissioner v: Duberstein, 268 U.S. 278; Commissioner v. Lo Bue, 351 U.S. 243; Commissioner ¥ v. Glenshaw Glass Co., 348 U.S. 426. As authority for excluding the value of meals i lodging from gross income, the taxpayer relies upon Section 119 of ; / : . ° 200 gg a rt, ~ nein sacri eme e e eae care nee . Court of Appeals Opinion | 5a the 1954 Code. This section hiss in velovanit part, i as . follows : SEC. 119. MEALS OR LODGING FURNISHED Thi FOR THE CONVENIENCE OF THE - EMPLOYER. — shall be excluded from gross income of an mployee the value of any meals or lodging furnished im by his employer for the convenience of. the em- ona but only if— (1) in the case of meals, the suet are furnished on « the business premises of the employer, or (2) in the ease of lodging, the employee i is required | to accept such lodging on the business premises of his employer as a wists 3 of his’ ie Sescea * * * (26 U:S.C. 1958 ed., Sec. 119) , Thus, therconditions for excluding the value of beitaie furnished an employee’ are three: namely, (1) that such — ~ lodging he furnished for the convenience of the employer; . (2) that it be located on the business premises of the em- : ployer; and (3) that the employee be required to accept such lodging as a condition of his employment. The condi- tions for excluding the value of. meals furnishedan em- ployee are two: namely, (1) that such meals be furnished « for the convenience of the employer and (2) that they be furnished ‘‘on the business premises of the employer’’. The Tax Court in an unreviewed opinion, and without | any specific effort at defining the statutory language ‘‘on . the business premises of the employer’’, concluded that * since 2 the employer, motivated by business reasons, and for - his own convenience, acquired the residence within two short blocks of the motel and required the taxpayer to. live there to be more readily available at the motél on 24 hour a day call, the residence was’ ‘‘on ¢he business prem- . x 6a : Court of Appeals Opinion ises’? of the employer within the meaning of Sec. 119. The _ specific language of the opinion in this regard was as fol- lows: “Tn our view to conclude that property ownedby an _. employer within two short blocks of a facility being. ’ managed by the employee who is required to be avail- able on a 24 hour call for management of the oer er’s business, is not on the business premises of the employer within the meaning of Section 119, where the - -employee is required to accept such lodgings for the ‘convenience of the employer, is too restrictive an inter- ' pretation. We, therefore, hold that the lodgings fur- nished to petitioner were furnished to him by his em- ployer for the convenience of the employer and -that etitioner was required to accept such lodgings.on the usiness premises of his employer as a condition of his employment.’’ , | Thus, the Court below appears to have interpreted the phrase ‘‘on the business premises of the employer’’ as in- - eluding any residential property owned by the employer and: furnished the employee, provided. (1) it was acquired from business - motives ; (2) it was-in the vicinity of or ‘‘within-two short blocks’’ of the place where the employee ‘performed his duties;‘and (3) the employee was. required to accept it as a condition of his employment. With this pragmatic conclusion this Court is unable to agree. Before undertaking a construction or definition of the statutory language ‘‘on-the business premises of the em- _ ployer’’ as that phrase is used in Sec. 119, it is proper. to call attention to the well settled rule of statutory construc- tion which requires that provisions within tax legislation: _ granting .exemptions be strictly construed in accordance with their terms. Helvering v. Northwest Steel Mills, 311. | » US. 46; United. States v. Stewart, 311 U.S. 60; Commis- - ‘Court of Appeals Opinion | - | Me _ Stoner v. Jacobson, 336 U.S. 28; Curtis v. United States, 336 _ ‘F.2d 714, 721 (€.A. 6th) ; Nielsen v. United States, 333 F.2d 615, 617 (C.A. 6th). As the Supreme Court stated in United . States v. Stewart, supra, p. 71: . ter ‘*, . . respondent has succeeded ter: Sata, A some doubt on the proper construction of the statute. Yet . _ those who seek an-exemption from a tax must rest it _ on more than a doubt or ambiguity. Bank of Commerce, v. Tennessee, 161 U.S. 134, 146; 163 U.S. 416, 423. Exemptions from faxation cannot rest upon mere im- ae ge United States Trust Co. v. Helvering, 307 S. 57, 60. As stated by Mr. Justice Cardozo in Trot- ter v. Tennessee, 290 U.S. 354, 356; ‘‘Exemptions from _ taxation are not to be enlarged by implication if doubts -are nicely balanced.’ And see Pacific Co., Ltd: v. John- son, 285 U.S.°480, 491. Hence broad, generalized statu- tory exemptions have frequently been construed nar- rowly and confined to those situations where the _ subject matter of the. exemption was directly, not in- directly or remotely, involved. Murdock v. Ward, 178 - US. 139; Hale v. State Board of Assessment and-Re-. view, 302.U.S. 95; United States Trust Co. v. Helver- mg, supra, *:.*,*7* * | drethecik | _ The requirement that meals and lodging must be fur- nished and accepted ‘‘on the business premises of the em- © ployer’’ is new in the 1954 Code. The original version of the statute, as enacted’ in the House of Representatives, . used the term ‘‘place of. employment’. This term was changed by the Senate to ‘‘business premises’’ and this ’ change was acceded to by the House. H. Conference Rep. - No. 2543, 83rd Cong., 2d Sess., p. 27 [3 U.S.C. Cong. & Adm. News (1954) 5280, 5286.] Nothing in the Senate or Confer- ence report suggests that ‘the term ‘‘business premises’’ was intended to extend the exclusion beyond the version . offered by the House. which used: the phrase ‘‘place of em- 8a - Court of Appeals Opinion ploymen of Indeed the Senate Report stated [S. Rep. No. _ 1622, 83d Cong. 2d Sess., p. 19 aCe USC. sabes & Adm. News (1954) 4621, 4649)]: AN ’ The House arid your committee has adopted provisions designed to end the confusion as to the tax status of - meals and -lodging furnished an employee by his em- ployer. Under both bills, meals and lodging are to be excluded from the e epee ’s income if they are fur- nished at the place of employment and the employee is required to meet certain oe, conditions — below. The Conference Report likewive contained similar language. There it is stated (H. Conference Rep. No. 2543, supra, p. 27):, _ The term ‘‘business premises of the employer’? is in-, tended, in general, to have the same effect as the term “place of employment’? in the House bill. For example, lodging furnished in the home to a domestic servant would be considered lodging furnished on the business premises of the employer. Similarly, meals furnished © to a cowhand while herding his employer’s cattle on leased lands, or on national forest lands used under a perme would also be regarded as furnished .on the usiness premises of the employer. pipet Thus, it would appear that ownership Ady the ott Kad of ‘the lodging or the place where the meals are furnished is not intended by Congress to be the crucial test, nor even an essential element, of the meaning of ‘‘business prem- ises’’. Rather, the emphasis is upon the place a duties of the employee are to be performed. This emphasis in defining ‘‘business premises”? i in terms ‘of the place where the employee performs significant duties of his employment is likewise set forth in the pertinent sore regulations, Sec. 1,119-1, wherein it is provided: Court of Appeals Opinion th > SEC. 1.119-1, MEALS AND LODGING ‘FUR- - NISHED FOR THE CONVENIENCE OF THE nnnadpnimguat wg * (c) Rules. (1) For purpose of this section, the - rm ‘‘business premises of the employer’” a steaai the place of veep soem of the SOT: * * (26 C.F.B., Sec. 1.119-1.) While this Court is not bound by . Treasury oeitulaibond where they are inconsistent with the revenue statute which. they seek to interpret and implement, they must be sus- tained unless unreasonable or plainly inconsistent with the © statute, and may, where long continued without substantial change, be-deemed to have received Congressional approval — and have the effect of law. Mc orrison v. United States, 355 F.2d 218 (C.A:°6,.1966). As stated in the case of Commis- sto toner v. South Texas Co., 333 U.S. 496, 501: : “This Court has many times declared that Sibaiaes regulations must be sustained unless unreasonable and . plainly inconsistent with the revenue statutes and that they constitute contemporaneous constructions by those charged with administration of these statutes . which should -not be hiatiehaeate except for weighty reasons.’’ © { The phrase ‘‘on the business premises of the employer”, as used in Sec. 119, has been the subject of judicial con- struction in other reported decisions. In the case of United States v. Barrett, 321 F.2d 911 (C.A. 5, 1963): the issue con- fronting the Court was whether state highway patrolmen '. were entitled to exclude from gross inteme the reimburse- ment received by them from the State of Mississippi for meals purchased at various locations .along the highway while on oe The Commissioner there sought to contend LA ERS AO 20 SUID Beso re Court of Appeals Opinion that ‘‘business premises’? was confined to the State Patrol Headquarters. The Court concluded that since the ‘‘busi- ness of the state law enforcement agency was not confined to the patrol headquarters, but rather, it covers every road and highway i in the State 24 hours a day every day’’, the . value of meals taken along the highway while on duty was excludable. A’ similar issue involving the eaeiueion of the’value of meals furnished a highway patrolman was presented in the case of United States v. Morelan, 356 F.2d 199 (C.A. 8, 1966) with a similar result being reached. In affirming the decision of the District Judge, reported at 237 F.Supp. © . 879, the Appeals Court concluded that restaurants near or adjacent to highways were ‘‘on the business prenffses of the employer’’ for the purpose of determining the exclud- ability of the value of meals taken there by a highway © patrolman while on duty. | Although the Court in each of the foregoing cases re- . jected the Commissioner’s contention that ‘‘business prerh-. _ises’’ would -be limited to premises owned or controlled by the employer, the decisions are consistent with the view — that the premises must be those upon which some portion _ of the employee’s duties were performed. In fact, the test was expressly so stated in the case of United States Junior Chamber of Commerce v. United States, 334 F.2d 660 (Ct. -Cl., 1964). There the plaintiff had provided a home for its national president. The issue confronting the Court was as to:the excludability from gross income under Sec. 119 of the rental value of the lodging thus furnished. Having -.. found as a fact that a significant portion of the president’s ' duties were performed at the home, the Court-held that the _ rental value ofthe home was not includable in the presi- - dent’s gross income. In so helding the Court stated: Pal eB! LNT RE PROT ERAOR FIR Ne - Court of Appeals Opinion | : : la. » “We think that the business premises of Section 119 7 -\\means premises of the employer on which the duties - of the employee are to be performed.” 3 An, even more pertinent decision ‘to the issue now con- _ fronting this Court is that of Dole v. Commissioner, 43 T.C. 697, as affirmed by the Court of Appeals for the First Cir- cuit at 351 F.2d 308. The significance of the Dole case lies not so much in its factual similarity with the present.case _ \ asin the fact that the decision of the Tax Court in the Anderson case upon the issue of ‘‘business premises’ was specifically rejected by the Court of Appeals. The exclud- ability by employees under Sec. 119 of the fair rental value. f Company-owned housing furnished for the convenience of the employer was there. involved. In an opinion con-.. - Stated: curred in by a majority of the Tax Court, that Court ‘There is still another, and equally compelling, reason for holding that petitioners have failed to. bring them- - selves within the purview of section 119. These com- pany-owned houses were not located ‘on the business premises’ of the Packard Mills. Congress has plainly stated that the phrase ‘on the business premises’ gen- erally means at the place of employment. See H. Rept. No. 1337, 83d Cong., pp..18, A39 (1954); S. Rept. No. 1662, 83d _Cong., pp.-19, 190 (1954) ; and Conference ' Report, H. Rept. No. 2543, 83d Cong., pp. 26-27. We think the phrase should be construed to mean either (1) living quarters -that constitute an integral part of the business property or (2) premises on which the . company carries on some-of its business activities. We doubt whether Congress ever intended section N9 to apply to situations such as this, where the employee does his work in one location and resides at another location some distance away. Whatever may he sai of the factual-conclusion reached in Charles N. Ander-» son [Dec. 26,806], 42 T.C. 410 (1964), on appeal (C.A. 6, November 20, 1964), that the-residence of the motel PSLOK EP SMELRL LL AIO RAOLEN 9 POLO OES RE Cpe Cage tayt TN ” SELLER a Ee 12a _ Court of Appeals Opinion - manager, being within ‘two short blocks’ of the motel, ‘was sufficiently integrated with the motel property as . to be ‘on the business premises,’ the facts here do not permit any such ultimate conclusion.’’ a concurring opinion.Judge Raum of the Tax Court t on to explicitly disapprove of the Tax Court decision — the Anderson case in the following terms: ; “The matter probably would never lave reached: this present state of apparent confusion and disagreement among the’members of this Court were it not for the unreviewed decision in Charles N. Anderson [Dec. 26,- 806], 42 T.C. 410. I think that Anderson is distinguish- able for the reason articulated in the majority opinion. But I also think that it is wrong and that it should be overruled to put an end to the confusion that it has oresteg.::) 3: rea > a - ‘‘The fact that the motel manager’s house in Anderson was ‘only two short blocks’ (42 T.C. at.p. 415) from the _ motel property should have been totally irrelevant. The. house either was or was not ‘on the business premises’, ‘and-I can find-no basis in the statute to-stretch those. premises ‘two short. blocks’, or ‘one short block’, or - . even ‘one-half short block’ beyond the perimeter of the motel property. Of course, if ‘two short blocks’ are ‘not fatal, it is easy to see how one miight»be tempted to enlarge the distance to the one,mile involved herein, “or, for that matter, two miles or five miles. The real difficulty is that neither the residence in Anderson nor | ‘any single residence‘involved herein is ‘on the business _ premises’ of the employer. And in view of the mischief: ad desi by Anderson'I think it should be explicitly isapproved.”’ ” ; The Court of Appeals in affirming, did so specifically.upon the opinion of Judge Raum. - * - } : sf: Each of the foregoing cases is consistent with an inter- pretation of the phrase ‘‘on the business premises of. the employer’’.as requiring that meals be furnished or lodging be provided: at a place where the employee performs some . Court of Appeals Opinion ae significant witiga of his duties. That this is not‘a complete ° definition of the concept of ‘business prentises,’’ however, may ‘be illustrated by the case of Boykin v. Commissioner, 260 F.2d 249 (C.A. 8, 1958). There a physican employed by the Veterans Administration was assigned living quarters in a residence located upon a Veterans Hospital grounds. - While no: duties were performed by the employee at the Eo residence, but rather at the hospital, no issue was raised : _in the case but that ‘under Sec. 119 the lodging was upon the ‘hospital grounds and therefore upon the premises where . the. employer’s business was conducted, ie., the hospital. _ The Court accordingly saw no. occasion to raise the *‘busi- "ness premises”? i issue, but rather the case went off upon the ‘meaning of other terms within the vanes which terms are - not here in issue. Having thus considered the eaniion of: the statute, to- _ gether with-the legislative history, the Treasury regula- tions, and the relevant case authority from other jurisdic- -tions, while all the time: bearing in mind the rule of statutory construction as hereinabove stated, this Court is of the opinion that the phrase ‘‘on the business premises of the employer,’’ as used in Sec. 119, mearis that in order for _ the value of meals or lodging to be excluded from gross in- come, the meals must be furnished or the lodging be pro- _ vided either at a place where the employee performs a | significant portion of his duties or on the premises where _ the employer conducts a significant portion of his business. - -. Returning now to the decision of the Tax Court, we are of the opinion. that. the Tax Court arrived at an erroneous " construction of the phrase ‘‘business premises’’. It has con- strued the phrase as requiring only that the meals be fur- _ nished or the lodging be provided upon property acquired by the employer from business motives, prévided that. such property is located in the vicinity of or ‘‘within two short 7 ~\ +. ~~ a “Court of Appeals ss an blocks’? of other sanele upon which the employer con- ducts his business. As regards lodging, the ‘additional re- - ‘quirement imposed by the statute to the effect that the employee pe’ required to accept the lodging as a condition of his, etiiployment is apparently included by the Tax Court within® its. definition: of ‘‘business premiises’’, To make ownership by the employer from business mo- q _~.tives the test of a ‘‘business premises’’ is to ‘fail to provide Ww for instances of meals furnished or lodging provided on non-owned premises, contrary to the expressed Congres- sional intent, while at the same time opening wide a tax loophole contrary to any expressed Congressional intent. ‘To make ‘two short blocks’? or nearness to other busi- ness propegty of the. employer the test is to disregard the word ‘‘on’’ as contained in the phrase ‘‘on the business premises of ‘the , /employer’’, thereby rendering uncertain that which is certain and Tequiring litigation in each.case to determine what may be sufficiently : near ‘under the circum- “. stances of the particular case. Had Congress so intended, it would appear that it could readily have used the words ‘‘in - the vicinity of’ or ‘‘nearby”’ or ‘‘close to”’ or ‘‘contiguous ° to’? or simitlar language, rather than say ‘‘on”’ the business premises. ~+, To make acceptance-by the employes as a condition of his employment the test is to-fequire that which is elsewhere expréssly required by the statute and render redundant the phrase ‘‘on the: business’ premises of the employer’. Examples, of course, can be given where ‘‘near’’ is so nearly equivalent to:‘‘on’’ as to indicate an absurdity in _ distinguishing between the two. However, this case does not present such an absurdity. Moreover, there is an ele- - “ment of. arbitrariness in the drawing of every line. The drawing ‘of not otherwise unreasonable tax lines is a legiti- mate function of Congress. When Congress drew cag line Cf . . Court of ‘Appeals Opinion 15a _ 80 ac to require that the meals be furnished: or the lodging be provided ‘‘on the business premises of the employer”’, it-is not the proper function of a court to disregard that line and substitute a line of its own choosing. ‘The Tax Court'did not purport to find that any significant portion of the taxpayer’s duties were performed Within the residence provided for his use. Merely being ‘‘on call”? would not of itself form a basis for such a finding. The © evidence is undisputed that the residence was located, upon property separate and apart from the motel. The'duties of | the employee were performed at the motel. The residence therefore was not itself a business premises. The business of the employer was located. at the motel. The residence _ therefore was not on the business premises of the employer. _ Rather, the residence was provided and the meals were -furnished upon a premises other than. the business prentises of. the employer. The decision of the Tax Court will be reversed and a. judgment will enter in accordance with this opinion. . -McAuusrer, Senior Circuit Judge, dissenting. This is a petition by~the Commissioner of Internal ~ Revenue for review of a decision of the Tax Court. There is’ one issue in this case: Whether a manager of a motel, who is entitled to an exclusion from gross income of the value of meals or lodging furnished to him on the business premises of his employer, is entitled to such ex- clusion if thé. premises furtiished to him for lodging, as a condition of his employment, are on the premises of. the street from the motel where he works—. e would be entitled to the exclusion if he were periittted to live on ‘the motel premises where he rxed for several years before his employer caused him to move, solely because the saint ‘could secure. more - income from the motel. nip the taxable years 1958, 1959, and 1960, Charles 16a ° ° Court of Appeals Opinion Anderson, taxpayer, was employed as’ manager of the Lincoln Lodge, a motel located in Columbus, Ohio. From the time Lincoln Lodge was opened on July 1, 1956, and until July 1957, Mr. Anderson, his wife and three children ‘occupied a two-room suite in the motel. In this case, Mrs. | Anderson was joined as a respondent, but the real taxpayer ; is Mr. Anderson, and, hereafter, instead of. referring to husband and wife as taxpayers, it will be sufficient to refer . to Mr. Anderson as the taxpayer. Because of the need for more space and the value of the rooms in the motel for guests, the Lincoln Lodge Corpora-— tion, owner of Lincoln Lodge, required Mr. Anderson to leave. the motel itself and reside nearby. His preference was a two-story house already constructed, but, instead, the owner of Lincoln Lodge selected the closest available lot to the lodge and constructed thereupon a small one-story dwelling for the use of Mr. Anderson, as manager, and his: family. The dwelling. was two-short blocks from the motel. _The immediate reason for the decision of the motel com- pany in requiring this change of residence for Mr. Ander- son, instead of having him arid his family live in the motel, } owas economic, ‘since the motel could realize much more . income through the renting of the rooms in the motel to guests, and building a house nearby for the Andersons. The evidence is clear that the taxpayer was required to live in the house ‘furnished by the company as a condition of his | employment as manager, and for the convenience of his- employer. He was obliged to be available and on call twenty-four hour’ a day for the.busirtess of the motel. The Commissioner determined that the taxpayer had re- _ eeived compensation. from his employer in the amount of $6,120 by reason of utilities, groceries, laundry and the like, Court. of Appeals Opinion | 17a ein Mr. Siiaiais by his employer, as well as the fair rental value of the house. The Tax Court found that meals and eee furnished : to Mr. Anderson while living in the house where he was - obliged to reside by the company, were furnished for the convenience of the employer and on the business premises of the employer within the’meaning of Section 119. of the Internal Revenue Code of 1954, and, accordingly, were ex- cludable: from the taxpayer’s anne income. 42 T.C. 410 (1964) © ‘Section 119 of the Internal eee Code of 1954: pre vides: is, & , tethers shall be excluded from gross income of an mployee the value of any meals or lodging furnished im by his employer for the convenience of the em- bine but only if— ‘ ‘*(1) in the case of meals, the meals are furnished, . on the business: premises of the employer, *-* *. ‘*¢2) ain the case of lodging, the employee is re- quired to accept such lodging on the business premises of his employer as a condition of.-his employment. rs ee secking a review of the decision of the Tax Court, the _ Commissioner insists that, because Mr. Anderson and his ' family were not residing in the motel, but in a house con-. ' structed for his use, as manager, on property nearby, owned - by the motel company, the meals and: lodging furnished to him at: such house, were not furnished on the business ‘premises of the employer. As to whether the one-story dwelling, expressly built by the. -employer.to house Mr. Anderson, as manager of the motel, together with his family,- constituted business prem- ises of the employer, there are, in our view, the Congres- sional history, as well-as a number of adjudications which 183, . ~~ Court of Appeals Opinion. support the decision of the Tax Court that such premises ia were actually ‘‘business “premises”? of the employer. But, before referring to those authorities; it is to be observed that the words ‘‘business,’’ and ‘‘premises’’ are two words of the most general meaning to be found in our language. “‘Business”’ is a word commonly used to describe every ~ occupation in which men engage. Bennett v. Hebbard; 74 . N.H. 411, 68 A. 537, The word ‘‘business’’ in’ its broad _ sense embraces everything about which one ‘can be. em- . ployed, and, in its narrower sense, it signifies a calling for the purpose of livelihood or profit. Easterbrook v. Hebrew Ladies’ Orphan Society, 85 Conn. 289, 82 A. 561. The meaning of the word ‘ ‘premises’’ is to be determined by: its context. and is dependent on the circumstances -in | which it is used. It is said that it has various meanings, depending on the subject matter in connection with which it is used. It has no fixed legal significance, and no definition applicable to every situation. O’Connor v. Great Lakes Pipe Line Co., 63 F.2d 523 (C.C.A. 8). ‘‘Premises’’ may mean a room, shop, building or definite area. Robinson v. State, 108 ' So. 903, 143 Miss. 247. The word is employed in various senses in particular phrases. State-v. Almy, 32 RI. 415, 79 A. 962. ‘ Because of the various meanings of the term ‘business — premises,’’ we have recourse, in our determination of its meaning, first, to the Congressional history of. the section of the statute in which it is used. ‘In the Report of the Ways and Means Committee of the House of Representatives on Section’ 119 of the Internal Revenue Code of 1954, it is stated: , - *Undér section 419, if meals or lodging (1) are furnished at the place. of employment, and (2) are re-- quired to -be accepted by the employee at the place © o med 38a. Court of Appeals Opinion b : yn | In our comments-on_ Judge Raum’s views, while we dis- _ agree with his conclusions, can on] admire his opinion for its force, clarity and judicial qu . In the concurring * opinion in the Dole case, calling for reversal of the..Ander- son case in the Tax Court, Judge Raum secured the-ad- a hesion. of two other judges out of the eleven judges ape: ticipating. However, on appeal to'the al of ‘Appeals for the First Circuit, that court, as heretofore stated, affirmed upon the | ~ concurring opinion of Judge Raum ina per curiam’opinion, : stating no more than: © 5 2? ee «Judgment -will be entered ‘affirming the heticin of o Tax Court on the concurring ete of. Judge aum. ine We have difficulty in perceiving why the per curiam of — ‘the! Court of Appeals for the First:Cireuit in Dole was based. solely on the concurring opinion of J udge Raum in the decision of that case in.the Tax Court. The Court of Appeals could well have affirmed the decision of the Tax Court in Dole, without reference to the concurring opinion of Judg: Raum, which called for the reversal of Anderson, for, as Judge Raum said, Dole was distinguishable from Anderson. Anderson was, at that time, on appeal to this court and rested on. entirely different facts than those in Dole. The decision of the-Dole case, either in the Tax Court or later in the Court of Appeals; would have no bearing on. Anderson. We cannot accept the Commissioner’s view that. the decision in Dole in the Court of Appeals for the First that the Tax Court’s opinion - and decision in Anderson : should be overruled. _ Circuit is persuasive authority, that the instant case should — be reversed, on the reasoning alone of Judge Raum in - _ his concurring opinion in Dole, and on his dicta in that case et ee Court of Appeals Opinion 390 While we — great vominot for the views of the First - Circuit, there appears to be in its opinion in the Dole case, insufficient development of the issues, and the resolution of -the problem involved.lacks the thrust, persuasiveness, and marshalling of argument necessary to overcome the well- ‘reasoned conclusions of all but three of the judges of the ~ Tax Court, whose, views were cogently set forth in three different opinions, supporting their prior decision in An- _derson, as well as the Tax Court’s decision itself in Ander- son, the opinion of ti» Court of. Appeals in Barrett, and both the District Courw’ s and ‘the Court of- Appeals: de- cisions in Morelan. The words and phrases. employed in a statute should be given a reasonable and sensible construction to carry out, if possible, the intention of the legislature. In our opinion, _ the Conference Report with reference to Section 119 of the Internal Revenué Code of 1954 makes clear what such rea-- | sonabie and ‘sensible construction was intended, and the casés of Morelan v. United States, 237 F.Supp. 879; United | States. v. Morelan, 356 F. 2d 199; United States v. Barrett, ~ 321 F.2d 911 (C.A. 5); Boykin v. Commissioner of Internal Revenue, 260 F.2d 249; United States Junior Chamber of . Commerce v..Umted States, 334 F.2d 660, and the Nolen. - case, decided by the Tax Court, all heretofore discussed, -. ¢onfirm that intent, and seem clearly to call for an affirm- — ance of the findings and opiiion of the Tax Court. . For the reasons stated in this dissenting opinion, it is my ' * view that the decision of the Tax Court should be affirmed in accordance with the findings of fact one the ae of Judge § Seott, 42 T.C. No, 410. a “oo Se _ IRS Regulation e UNITED STATES COURT OF APPEALS - FOR THE SIXTE CIRCUIT c] No. 16389. .°- . aula Dec. 23; 1966) | ‘COMMISSIONER OF INTERNAL REVENUE, | Pétitioner, vs. CHARLES N. ANDERSON AND. GRACE M., AN DERSON, Respondents. BEFORE: CELEBREZZE, Cir cuit ‘Judge, MeALLIS- 2 TER, Senior Circuit J i and ae | _ Distriet J udge. On Petition to Review a decision of the Tax Court . of the United States. Sah, er — This cause came on to be heard on the transcript of réc- ord from the Tax Court of the United States, and was ‘argued by counsel.. | ) ON COON SIDERATION WHEREOF, It is now here Ec ordered and adjudged by this court that the decision of the said Tax Court in this cause be and the same is hereby reversed and the cause remanded for entry of a judgment | in accordance with the opinion of this Court. No costs awarded. Rule 23 (4). Entered. to order of the Court. | /s/ Cart W. Reuss,’ % . , BAS an ' Clerk. IRS Regulation Ta APPENDIX B _-IRS REGULATION | Section 1.119-1 of the Code of Federal Regulations. §1. 119-1. Meals and lodging furnished for the conveni-* ence. of the employer.—(a) Meals—(1) In/ general. The value of meals furnished to an employee by his employer shall be excluded from the employee’s gross income if two ‘tests gre met: (i) The meals are furnished on the business : premises of the, employer, and (ii) the meals are furnished for the convenience of the employer. The question of whether meals are furnished for the convenience of the employer is one of fact to. be determined by analysis of all - the: facts and circumstances in each case. If the tests de- scribed ‘in subdivisions (i) and (ii) of this subparagraph are met, the exclusion ghall apply irrespective of whether - under an employment coutract or a statute fixing the terms ' of employment such meals are furnished as compensation. — (2) Meals furnished without a charge. (i) Meals furnished by an employer without charge to the employee will be. regarded as furnished for’ the convenience of the - _ employer if such meals ate furnished for a substantial non-- compensatory business reason of the employer. If an em- ployer furnishes meals as a means of providing additional - compensation to his employee (and not for a substantial | noncompensatory butsinéss reason of the employer), the meals so furnished will not’be regarded as furnished for _ _ the convenience of the .employer. Conversely, if the em- ployer furnishes meals to his ‘employee for a substantial noncompensatory businegs reason, the meals so furnished will be regarded as furnished for the convenience of the employer, even though such meals are also’ furnished for a compensatory reason. In determining the reason of an _e a - e b Me . . . ° ° : ° “ . = 43a . JBS:Regulation employer for furnishing meals, the mere declaration that : meals are furnished for a noncompensatory business reason 18 not sufficient to prove that meals ‘are furnished for the _convenierice of.thée employer, but such determination will be _ based upon an examination of all the surrounding facts and circumstances. In ‘subdivision (ii) of this subparagraph, ‘there are set:foith some of the substantial noncompensatory _ business reasons which occur frequently. and which justify - the conclusion that meals furnished for such a reason are ‘furnished for the convenience of the. @mployer. In sub- - division (iii) of this subparagraph, there are set forth some of the business, reasons which are considered to be com- pensatory and which, in the absence of a substantial non-. fs compensatory business reason, justify the conclusion that meals furnished for such a reason are not furnished for the convenience of the employer. Generally, meals furnished’ before or after the working hours of the employee will not be regarded as furnished for the convenience of the em- ployer, but see subdivision (ii) (d) and (f) of. this. sub- ____paragraph for some exceptions to this general rule. “Meals © furnished on nonworking days do not qualify for the ex- _ elusion under section 119. If the employee is required to occupy living quarters on the business premises‘ of his. ° employer as a condition of his employment (as defined in pha paragraph (b) of this: section), | the exclusion applies to the value of any meal furnished without oe to the em-. ployer. 0 on such premises. . an ~~ (ii) (a) Meals will be regarded : as faruished for a substantial noncompensatory business reason of the em- . ployer when the meals are. furnished to the employee’ _ during his ‘working hours to have the employee available ‘for emergency ‘call during his meal period. In order to demonstrate that meals are furnished to the employee to ~ have the employee available for emergency call during the IRS Reputation wae . Ba ‘meal: portent it must be laws that emergencies have actu- : ally occurred, or can reasonably be excepted to occur, in the employer’s business which have resulted, ‘or will result, in the employer calling on the employee to papogeri his job during his meal period. . -(b) Meals will be begeivtal as. 3 furnished for a substantial noncompensatory business reason of the em- ployer when the meals are furnished to the employee during ‘his working hours because the employer’s business is such that the employee must be restricted to a short meal period, such as.30 or 45 minutes, and because the employee could not be expected to’ eat. elsewhere in such a short ‘meal ‘period. . For example, meals may qialify under this sub- division when the employer is engaged in a business in: which the peak workload occurs during the normal lunch. hours.. However, meals cannot qualify under this sub- division (b) when the reason for. restricting the time-of-"——— _ _ the meal period is so that-the eps ane can be let off earlier | ~ in inthe day. (c) Meals will a medion as furnishad 1 for 7 a substantial noncompensatory business reason of the em- ployer when the meals are furnished to the employee during his working hours because the employee could not otherwise _, Secure proper meals within a reasonable meal period. For example, meals may qualify under—this subdiyision (c) ____when-there are insufficient eating facilities i in the oy PPE LRN NAS EA OA TEE SELENIDE LEER: BE GLE LY ERSTE AN CI NE NE ROE A of the employer’s premises. (ad) A meal furnished to a risiteititesit em- ployee or other food service employee for each meal period . -in which the employee works will be regarded as furnished for a. substantial noncomperisatory business reason of the employer, irrespective of Whether the meal is furnished during, immediately before, or immediately after wd work- ing hours of the employee.: . | , = ployees. ie IRS Regulation _ » oA(e) It ra employer furnishes shele Pa em-. ployees at & place of business} and the reason for furnish- ing the meals to each of substantially all. of the employees , who are furnished the meals is a substantial noncompensa~ tory business reason of the employer, the meals furnished to each other employee will also be regarded as furnished | for.a substantial rn ire business reason of the employer. _ : (f) If an employer would | have. futiished a a meal to an employee “during his- working. hours for a sub- | mh ely business. reason, a meal furnished _to-such employee immediatély after his working hours: se his duties prevented him from obtaining @ meal ~ : ‘during his working. hours will be regarded as furnished for a substantial noncompensatory business reason. iii). Meals will be regarded as furnished for a > \ compensatory business reason of the employer when the meals are furnished to the employee to promiote the morale or goodwill of the rr. or to attract —" em- (3) Meals furnished aed a charge. (i). If an em- ployer provides meals which an employee may or may not _ purchase, the meals will riot be regarded as furnished for _ the convenience of the employer. Thus, meals for which a _ charge is made by the employer will not bée regarded as ,_ furnished’ for the convenience of the einployer if the em- © ployee has a choice of accepting the meals and paying for them or of not paying for them and providing | his meals in another manner. ie ‘ (ii) If an employer furnishes an . employee "meals ‘for which the employee is ‘charged an unvaryipg _ amount (for example, by subtraction from’ ‘his stated com- - pensation) irrespective of whether he accepts the meals, the amount of such flat charge made by fhe employer for IRS Regulation i a such mebls : is not, as such, part of 8h compensation inclu-. ‘dible in- the gross income. of the. ployee; whether the value of the meals so furnished i is excludable under section 119 is determined-by “applying ‘the rules of subparagraph : (2) of this-paragraph. If meals furnished for an unvarying _amount are not furnished for the.convenience of the em-. ployer in accordance-with the ,rules of subparagraph (2) of this paragraph, the employee shall include in gross. income the value of the meals regardless of whether the value exceeds or is less than the amount charged for such meals. In the absence of evidence to the contrary, 'the value "of the méals may be doemiog to be 5 aad ‘to the amount apaiges for them. } -(b) Lodging. The value, of lodging furnished to an em- ployee by, the employer’shall be excluded from the em- . ' ployee’s gross income if three tests are met: , (1) The lodging i is furnished on the business prem. Sag ises of the employer, i The lodging is furnished for the convenience - of the employer, and ' (3) The employee ‘is required to accept ‘such lodg- ing as a condition of his employment. _ -The requirement of subparagraph (3) of this ulema that the employee is required to accept such lodging as a . condition of his employment means that he be required to accept the lodging in order. to enable him properly to per- ‘ form ‘the duties of his employment. Lodging will be re- garded as furnished to enable the employee properly to 7 perform the duties of his employment when, for example, . _ the lodging i is furnished because the. employee is required to be available for duty at all'times or because the employee - could not perform the services required of him unless he is . . furnished such nae If the tests described in — aa =—S—=_ Example (9). A hospital maintains a pe on its premises where all of its 230 employees may obtain: a meal during their working hours. No charge is made for these meals. The hospital furnishes such meals in order to have ae each of 210 of the employees available for any emergencies : that may occur, and it is shown that each such employee — is at times called upon to perform services during his meal — period. Although ‘the hospital does not require such em- | ployees to remain on the premises during meal. periods, they rarely leave the hospital during their meal period. Since the hospital furnishes meals to each of substantially all of its employees in order to have each of them available for emergency call during his meal period, all of the hos- pital employees who obtain their meals in the hospital cafetéria may exclude from their gross income the value of such meals. [26 C.F.R., Sec. 1.119-1.]. ef 50a me Certificate of Service CERTIFICATE OF SERVICE - I, George D. Massar,* one of the attorneys of record for ‘the Petitioners herein, and a member of the bar of this Court, hereby certify that copies of the above and foregoing - Petition for Writ of Certiorari have this day been deposited. in the’ United States mail, postage prepaid, under —. cover r to each of the following addressees : Solicitor General - : Department of Justice Washington, D. C. 20525 . Louis F. OserporFer . Assistant Attorney General - Office of the United States Attorney General aoe faery sree} D.C. 20530 Lee A. J ACKSON Chef - Appellate Section his United States Department of ne ustice | Washingtép, D:0: 20530: Commissioner of. Internal Revenue > Internal Revenue Building» Washington, D.C. | “Dated: ‘March 22, 1967. Gzorce D. Massar. care nad ss hates LAD 3 30 stiri wise hii cetcthiiiilanlninainsniniabie --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385603_0425%3A2. Public record. Not legal advice.