Papineau v. Comm'r of Internal Revenue
| Decision Date | 19 January 1951 |
| Docket Number | Docket Nos. 24256,24257. |
| Citation | 16 T.C. 130 |
| Parties | GEORGE A. PAPINEAU, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Richard W, Williams, Esq., for the petitioner.
Marvin E. Hagen, Esq., for the respondent.
INCOME— MEALS AND LODGING— REGULATIONS 111, SECTION 29.22(a)-3.— A partner, who manages a hotel for his partnership and lives at the hotel as a part of his job, has no taxable income from meals and lodging had by him at the hotel.
The Commissioner determined a deficiency of $1,690.75 in income tax of the petitioner for 1944 and one of $1,736.97 for 1945. The issue is whether the Commissioner erred by including in the petitioner's distributive share of the net income of a partnership for each year an amount to represent the estimated value of his board and lodging. The facts have been stipulated.
The petitioner filed his individual income tax returns for 1944 and 1945 with the collector of internal revenue for the district of Nebraska. He is an experienced hotel manager.
Castle Hotel, Ltd. is a limited partnership which operates the Castle Hotel at Omaha, Nebraska, a commercial hotel, usually entertaining from 300 to 600 guests. It operates a bar, and furnishes meals and rooms to its guests.
The partners and their interests are as follows:
+----------------------------------------------+
¦ ¦Per cent ¦
+-----------------------------------+----------¦
¦George A. Papineau, General partner¦32 ¦
+-----------------------------------+----------¦
¦Edwin A. Boss, General partner ¦20 ¦
+-----------------------------------+----------¦
¦Ethel M. Boss, General partner ¦16 ¦
+-----------------------------------+----------¦
¦Donald A. Boss, Limited partner ¦16 ¦
+-----------------------------------+----------¦
¦Betty Boss, Limited partner ¦16 ¦
+----------------------------------------------+
The petitioner was the manager of the hotel during the taxable year and devoted all of his time to his duties as manager. He lived in the hotel and took his meals there pursuant to his agreement with his partners. That arrangement was essential in order to manage the hotel to the best advantage of the partnership during all hours of the day and night. The partnership distributed $2,100 annually to him for his services as manager before computing the percentages of the partners in the profits of the business.
The partnership deducted all costs, expenses and other items without eliminating any amounts to represent the cost to it of the board and lodging furnished the petitioner.
The Commissioner, in determining the deficiency for 1944, increased the petitioner's income by $2,352.61 to represent additional distributive income from the partnership and, although the record does not disclose how it was computed, it is proper to assume that it included $870 for the value of meals and lodging furnished him by the Castle Hotel.
The Commissioner, in determining the deficiency for 1945, added $1,200 to the income of the petitioner to represent the value of meals and lodging furnished him by the Castle Hotel.
It is stipulated that the reasonable value of the meals and lodging furnished the petitioner by the hotel was $870 for 1944 and $1,200 for 1945.
The broad question here is whether all or any part of the value of the meals and lodging which the petitioner had at the Castle Hotel represents income to him.
The Commissioner has long had a regulation providing that the value of living quarters received as compensation for services rendered is taxable income unless furnished to an employee for the convenience of the employer. See Regulations 45, Article 33 and similar provisions up to Regulations 111. Nevertheless, he included in the income of Arthur Benaglia, amounts to represent the value of meals and lodging furnished him by a hotel which he was employed to manage. See Arthur Benaglia, 36 B.T.A. 838. Benaglia proved that he lodged and dined at the hotel as a part of his duties in managing the hotel rather than for his personal convenience and benefit and we held that the meals and lodging were not compensatory in nature and their value was not income to Benaglia. The Commissioner acquiesced and added the words ‘or meals‘ after ‘living quarters‘ in his regulations.1 He argues that his action in the present case is right under that regulation because the petitioner received his meals and lodging as a partner and a partner cannot be an employee of his partnership. He quotes from Estate of S. U. Tilton, 8 B.T.A. 914, in which it was said in deciding other questions that:
* * * A partner devoting his time and energies to the business of the firm is in fact working for himself and cannot be considered as an employee of the firm in the sense that he is in the service of another. It follows, therefore, that he cannot be paid a salary by the firm out of earnings in the sense of compensation for services rendered to an employer. In effect any allowances drawn by a partner from partnership assets are payments which he makes to himself and no man can be his own employer or employee. * * *
It is at once apparent that if a partner is a proprietor who...
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Kowalski v. Comm'r of Internal Revenue , Docket No. 112-73.
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Commissioner of Internal Revenue v. Moran, 15505.
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CIR v. Robinson, 12940.
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