Benaglia v.

Commissioner, 36
B.T.A. 838 (1937)
Nov 11, 2014 by Vahid Dejwakh

Facts and Procedural History

Petitioner is manager of hotels in Hawaii, for which he receives both a salary and free room and board. The IRS Commissioner

includes the room and board that he and his wife receive as part of his taxable income. Petitioner argues he has to live in the

hotel room as a necessary part of his job as manager of the hotel, and that it should not be counted as constituting part of his

salary.

Issue(s)
Should petitioner's receipt of a room and board from his employer be counted as taxable income when petitioner is living there

at the request of his employer?

Holding and Dissent(s)

Reversed in favor of petitioner. Evidence from both the employer and employee was that residence in the hotel was a necessary

part of the job. Corporations books carried no accounting for the petitioners meals, rooms, or service. Analogizes case to 1)

Jones v. United States, where the value of military quarters was not included in the taxable income of an Army officer, and to 2)

the English case of Tennant v. Smith, H.L. (1892), where a bank employee was required to live in quarters located in the bank

building, the value of which was not included in his taxable income. Here, because the meal and room was supplied to petitioner

merely as a convenience to the hotels, they should not be included in taxable income.

DISSENT: During the negotiations for employment, the petitioner made sure to mention the free room and board. Distinguish

this case from Jones v. US, because here the employment was a matter of private contract, while in Jones, the compensation

was fixed and subject to military law. Petitioners constant presence here was not actually needed, since records show he was

responsible for two hotels and did not have a residence at both, and he was also absent from Honolulu several times. Even if the

employer required his residence in the hotel, petitioner still benefited from it.

Analysis and Discussion

The employer, in giving the room benefit to employee, has a purpose other than to compensate employee (i.e. a responsibility

to be available to fix hotel problems) > convenience of employer