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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 the
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