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establish, among other things, the number of meals eaten, by whom
the meals were eaten, or at what time the meals were eaten.
Respondent also argues that substantially all of petitioners'
employees did not receive the meals for a substantial
noncompensatory business reason because less than 90 percent of
the employees qualified for the section 119 exclusion.
Respondent relies on section 1.119-1(f), Example (9), Income Tax
Regs., in asserting that the "substantially all" test of section
1.119-1(a)(2)(e), Income Tax Regs., requires that at least
90 percent of the meals received by the employees be excludable
under section 119. Section 1.119-1(f), Example (9), Income Tax
Regs., sets forth an example under which 91.3 percent of the
taxpayer's employees is "substantially all" of the taxpayer's
employees within the meaning of the regulations. This example
states:
A hospital maintains a cafeteria 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 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 employees 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 hospital employees who
obtain their meals in the hospital cafeteria may
exclude from their gross income the value of such
meals.
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