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allowed to eat in designated areas of the Properties’ public
restaurants, during the employees’ work shifts. Petitioners
provided the meals without any out-of-pocket cost to the
employees. Petitioners provided the meals for a variety of
operational reasons. Petitioners’ provision of the meals was not
discriminatory in favor of highly compensated employees.
Most, if not all, of the casinos in Las Vegas provided meals
to their employees during the relevant years. In order to
attract and keep employees, petitioners offered packages of
compensation and benefits that were competitive in the
marketplace. Meal benefits during an employee’s shift were
included in commonplace packages.6 In consideration for the meal
benefits, petitioners were able to require their employees to
stay on the Properties’ premises during their entire shift.
An employee who left the premises during his or her shift,
without authorization, was subject to disciplinary action up to
and including discharge.
For the subject years, the Commissioner disallowed
20 percent of the deductions that petitioners reported for the
cost of their employees’ meals. According to the notices of
deficiency, section 274(n) prohibits petitioners from deducting
20 percent of the meals’ cost. In its petition, CHC alleges that
it did not deduct 20 percent of the meals’ cost for its 1987
taxable year, and that it was entitled to do so.
Discussion
6 Sometimes, meal benefits were required by union contracts.
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