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II. Exclusion of Lodging Costs
We now consider whether petitioners may exclude the value of
lodging provided by their employer from income under section 119.
Gross income generally includes all income from whatever source
derived, including compensation for services. Sec. 61(a)(1).
Compensation for services includes income realized in any form
including money, property, or services. Sec. 1.61-2(d)(3),
Income Tax Regs.
The value of lodging provided to an employee, his or her
spouse, and his or her dependents may be excluded from income if
certain conditions are met. Sec. 119. To exclude the value of
lodging, the employee must accept the lodging as a condition of
his or her employment, the lodging must be furnished for the
convenience of the employer, and the lodging must be on the
business premises of the employer. Sec. 1.119-1(b), Income Tax
Regs. The employee must meet all three of these conditions to
qualify for the exclusion. Dole v. Commissioner, 43 T.C. 697
(1965), affd. per curiam 351 F.2d 308 (1st Cir. 1965).
The parties agree that petitioners were required to accept
the lodging as a condition of their employment and the lodging
was furnished for the convenience of TRW. Accordingly, the first
two conditions are met. See sec. 1.119-1(b), Income Tax Regs.
The parties dispute, however, whether the lodging is on TRW’s
business premises.
The business premises of the employer are generally the
place of employment of the employee. See sec. 1.119-1(c)(1),
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