Olkjer v. Comm'r of Internal Revenue, Docket No. 68410.
| Decision Date | 29 May 1959 |
| Docket Number | Docket No. 68410. |
| Parties | WILLIAM I. OLKJER AND LEORA D. OLKJER, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Herbert F. Miller, Esq., for the petitioners.
Walter O. Johnson, Esq., for the respondent.
Petitioner was employed at Thule, Greenland, during part of the taxable years 1954 and 1955 as a construction engineer on a project being constructed under contract with the Department of the Army. According to the terms of his written employment agreement with the contractor, there was a scheduled workweek of 7 consecutive days. Petitioner was to receive a fixed hourly wage rate based on a 40-hour week and was to work such hours and shifts as might be required by the contractor. No facilities for meals and lodging other than those furnished by the employer were available to petitioner at the jobsite. Pursuant to the terms of the employment agreement, the employer deducted, at the rate of $5.75 per day, the respective amounts of $1,771 and $437 in 1954 and 1955 from petitioner's wages as the value of the meals and lodging and other facilities furnished to petitioner during said years. The parties have stipulated that the only question to be decided by this Court is whether the meals and lodging were furnished for the convenience of the employer under section 119 of the Code of 1954. (There remains also the subsidiary question of the value to be attributed to food and lodging, as distinguished from other facilities furnished, if it is held that food and lodging were furnished for the convenience of the employer.) Held, that the meals and lodging in question were furnished petitioner for the convenience of his employer under the provisions of section 119. Value of meals and lodging determined.
This proceeding involves deficiencies in income tax determined against petitioners for the years and in the amounts following:
+--------------------+
¦Year ¦Deficiency ¦
+------+-------------¦
¦1953 ¦$662.00 ¦
+------+-------------¦
¦1954 ¦700.18 ¦
+------+-------------¦
¦1955 ¦279.49 ¦
+------+-------------¦
¦Total ¦1,641.67 ¦
+--------------------+
Petitioners have conceded all issues involved herein relating to the taxable year 1953.
The only issues presented for our consideration are whether meals and lodging were furnished petitioner for the convenience of his employer during the years 1954 and 1955, under section 119 of the Code of 1954, and, if so furnished, the value properly attributable to meals and lodging.
All of the facts are stipulated in writing and, together with exhibits, are included herein by this reference.
William I. and Leora D. Olkjer were husband and wife during the taxable years, 1953 to 1955, inclusive. They filed a joint income tax return for each of these years with the director of internal revenue for the district of Colorado. William I. Olkjer, hereinafter referred to as petitioner, is a construction engineer.
Petitioner was employed as a project engineer for North Atlantic Constructors, hereinafter called the employer, a joint venture operating under a contract with the Department of the Army for the performance of certain construction at Thule, Greenland. Petitioner was employed on said job for a period of 308 days in 1954 and 76 days in 1955. During petitioner's period of employment at Thule, Greenland, he maintained a home for his family in Boulder, Colorado.
Petitioner was employed with North Atlantic Constructors under the terms of a written Off-Continent Employment Agreement which contained, inter alia, the following provisions:
SECTION 2. TERM OF AGREEMENT.
The term of this Agreement shall be the period during which the services of the Employee are required. No definite period of employment is assured; however, after eight (8) months continuous employment at the job site the Employee may terminate his employment hereunder by giving the Contractor written notice specifying the date on which he desires to terminate his employment, which date shall not be less than fifteen (15) days after the date of delivery of such notice to the Contractor.
SECTION 4. OVERTIME AND HOLIDAY PAYMENTS.
(a) The Employee shall work such hours and such shifts as may be required by the Contractor. All work required by the Contractor and performed in excess of forty (40) hours per week (of the work week regularly established by the Contractor) will be paid for at one and one-half (1 1/2) times the hourly wage rate above provided. Saturday, Sunday and holidays, as such, shall not be considered as overtime days. Sunday through Saturday shall constitute the scheduled work week of seven (7) consecutive days.
(b) In computing weekly hours for overtime purposes, hours within any work week for which the Employee receives travel time in accordance with Section 5 hereof, will not be counted as hours worked. Premium time will not be paid while Employee is in travel status.
(c) Wages for hours worked in excess of sixty (60) hours per week will accrue, but will not be paid to the Employee until he is terminated.
SECTION 7. JOB SITE FACILITIES.
(a) Board, lodging, laundry and dry cleaning when available, social services, and such hospitalization, medical services and temporary dental care as in the opinion of the Contractor may be desirable, to keep the Employee in condition to render proper services, will be furnished by the Contractor at the job site to the extent authorized by the Contracting Officer, at a charge of Five Dollars and Seventy-Five Cents ($5.75) per day. The Employee hereby authorizes the Contractor to deduct all such charges from any payments otherwise due to the Employee hereunder.
(b) The Employee agrees that no claim shall arise against the Contractor for the adequacy of job site facilities furnished hereunder, it being recognized by the Employee that conditions at the job site are unusual; the Contractor will, to the extent of his ability, furnish the best facilities which are possible under the conditions encountered.
SECTION 10. TERMINATION OF EMPLOYMENT.
The Employee agrees that if he quits or is terminated for cause prior to the completion of eight (8) months service hereunder, the Contractor's obligations to the Employee shall cease on the date of such quitting or termination for cause, and the Employee shall be liable for the costs and other expenses for his return to the United States. * * *
SECTION 24. CERTIFICATION BY EMPLOYEE.
The Employee certifies to the Contractor that he has read the foregoing agreement and that he fully understands its terms and conditions, and further certifies that the foregoing terms and conditions constitute his entire agreement with the Employer, and that no promises or understandings have been made other than those stated above; and it is specifically agreed by the parties hereto that this agreement shall be subject to modification only by written instrument signed by both the contractor and the employee.
Petitioner was furnished food and lodging and other facilities at the jobsite at Thule, Greenland, by the employer. Pursuant to the terms of section 7 of petitioner's employment agreement, the employer deducted, at the rate of $5.75 per day, the sum of $1,771 (on the basis of 308 days) in 1954 and $437 in 1955 (on the basis of 76 days) from petitioner's wages.
The charge of $5.75 was established by the Corps of Engineers, United States Army, as a reasonable estimate to cover the cost of meals, quarters, medical services, laundry, drycleaning, and recreation, and no distribution of this credit was effected. Any additional cost of maintaining these services over and above the credit resulting from the daily deduction was subsidized by the Federal Government.
No facilities for meals and lodging, other than those furnished by the employer, were available to petitioner at the jobsite at Thule, Greenland.
During the year 1954, petitioner received wages of $20,611.25 from the North Atlantic Constructors, before payroll deductions, from which the sum of $3,100.63 was withheld for income tax.
During the year 1955, petitioner received wages of $5,170 from said employer before payroll deductions, from which $792.10 was withheld for income tax.
On his joint returns for each of the years 1954 and 1955, p...
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