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and lodging expenses are the Weeldreyers’ personal, family, and
living expenses and that payments of these expenses by Dreyer
Farms constitute constructive dividends to the Weeldreyers. On
the other hand, petitioners assert that all the expenditures are
reasonable and necessary business expenses, deductible by Dreyer
Farms and excluded from the Weeldreyers’ income.
Petitioners contend that the medical costs are employee
benefits, deductible by the employer and excludable from the
employee’s income under sections 105 and/or 106. Petitioners
further maintain that Dreyer Farms provided food and lodging to
Mr. Weeldreyer in his capacity as an employee and that such was
done for the convenience of Dreyer Farms. Consequently,
petitioners assert that the food and lodging expenses are
employer-provided “meals and lodging”, the costs for which are
excluded from the Weeldreyers’ income under section 119 and
deductible by Dreyer Farms. Petitioners further assert that, as
owner and lessor of the farmhouse, Dreyer Farms is entitled to
deduct (1) the expenditures for insurance, remodeling,
landscaping, and repairs and maintenance as reasonable and
necessary business expenses under section 162, (2) the property
taxes under either section 162 or 164, and (3) the depreciation
of the farmhouse under section 167. Petitioners posit that these
latter expenses are not the Weeldreyers’ personal expenses
because they are not the owners of the property.
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