James A. Nielsen - Page 11




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          employee must accept the lodging as a condition of employment,              
          (2) the lodging must be furnished for the convenience of the                
          employer, and (3) the lodging must be on the business premises of           
          the employer.  Sec. 1.119-1(b), Income Tax Regs.  The exception             
          to the general rule will not apply, and the value of the lodging            
          will be included in gross income if the employee fails to satisfy           
          any of these three conditions.  Dole v. Commissioner, 43 T.C.               
          697, 705 (1965), affd. per curiam 351 F.2d 308 (1st Cir. 1965);             
          see Commissioner v. Schleier, 515 U.S. 323, 328 (1995) (holding             
          that exclusions from gross income are construed narrowly).                  
               There is no dispute in this case that a condition of                   
          petitioner’s employment with Raytheon at Pine Gap was                       
          petitioner’s acceptance of assigned housing.  There is likewise             
          no dispute that such lodging was furnished for the convenience of           
          the employer.  At issue is whether the lodging furnished to                 
          petitioner in Alice Springs was on the business premises of the             
          employer.                                                                   
               Section 1.119-1(c)(1), Income Tax Regs., defines the term              
          “business premises of the employer” as the place of employment of           
          the employee.  The Court has construed the phrase “on the                   
          business premises” to mean either:  (1) Living quarters that                
          constitute an integral part of the business property, or (2)                
          premises on which the employer carries on some of its business              
          activities.  See Dole v. Commissioner, supra at 707 (holding that           







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