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revenue derived from the facility equals or exceeds the direct
operating costs of the facility (the revenue/operating cost
test). Boyd Gaming Corp. v. Commissioner, 106 T.C. at 348; see
also sec. 132(e)(2); sec. 1.132-7(a), Income Tax Regs. The
parties focus mainly on the revenue/operating cost test. So do
we. For purposes of the revenue/operating cost test, an employer
may disregard the cost and revenue for each employee meal that
the employer determines reasonably is excludable from the
recipient's gross income under section 119. Sec. 1.132-7(a)(2),
Income Tax Regs.6 Section 119(a) excludes from the recipient's
gross income "the value of any meals * * * furnished to him, his
spouse, or any of his dependents by or on behalf of his employer
for the convenience of the employer, but only if * * * the meals
are furnished on the business premises of the employer". Sec.
119(a).
The parties agree that section 119 allows some, but not all,
of petitioners' employees to exclude from gross income the value
of meals received from their employers. The parties dispute
whether section 119 allows each of substantially all of the
employees to exclude the value of the meals from gross income.
6 Sec. 1.132-7(a)(2), Income Tax Regs., provides:
If an employer can reasonably determine the number of
meals that are excludable from income by the recipient
employees under section 119, the employer may, in
determining whether the * * * [revenue/operating cost
test] is satisfied, disregard all costs and revenues
attributable to such meals provided to such employees.
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