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personal, family, and living expenses and that payments of these
expenses by Wolf Creek Farm constitute constructive dividends to
Mr. Tschetter. On the other hand, petitioners assert that all
the expenditures are reasonable and necessary business expenses,
deductible by Wolf Creek Farm and excluded from Mr. Tschetter’s
income.
Petitioners contend that the medical costs are employee
benefits, deductible by the employer and excludable from the
employee’s income under sections 105 and/or 106. Petitioners
further maintain that Wolf Creek Farm provided food and lodging
to Mr. Tschetter in his capacity as an employee and that such was
done for the convenience of Wolf Creek Farm. Consequently,
petitioners assert that the food and lodging expenses are
employer-provided “meals and lodging”, the costs for which are
excluded from Mr. Tschetter’s income under section 119 and
deductible by Wolf Creek Farm. Petitioners further assert that,
as owner and lessor of the farmhouse, Wolf Creek Farm is entitled
to deduct (1) the expenditures for insurance on the farmhouse as
reasonable and necessary business expenses under section 162, (2)
the property taxes under either section 162 or 164, and (3) the
depreciation of the farmhouse under section 167. Petitioners
posit that these latter expenses are not Mr. Tschetter’s personal
expenses because he is not the owner of the property.
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