- 76 - furnished for a compensatory reason are not excludable from income under section 119. 8. Attract Prospective Employees An employer furnishes a meal to an employee for a compensatory business reason if the employer furnishes the meal intending to attract prospective employees. Sec. 1.119-1(a)(2)(iii), Income Tax Regs. Petitioners furnish the meals to their employees to attract new employees. Accordingly, petitioners have a compensatory business reason in furnishing the meals and, absent a substantial noncompensatory business reason, the meals are not excludable from income under section 119. 9. Compensation Under Contract or Statute The labor agreements at hand do not explicitly characterize the meals as employee compensation. Our characterization of the meals as compensation, however, is not bound to the language that the parties to an agreement utilize therein. We look to the facts and circumstances of this case to determine whether the actions of the parties to the agreements indicate that the parties intended that the meals be compensation. We answer this question in the affirmative. We read the record to indicate that one of petitioners' reasons for providing meals to their employees is to fulfill the unions' demand that petitioners provide union employees with meals during their working hours for the primary benefit of thePage: Previous 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 Next
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