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Benaglia v. Commissioner | 36 B.T.A. 838 (1937)

A job that comes with free accommodation and meals relieves an employee of substantial everyday living expenses. In Benaglia versus Commissioner, we explore whether the federal tax implications of such an employer-provided benefit vary depending on the reason the benefit is offered.

Hawaiian Hotels Limited hired Arthur Benaglia as the manager of multiple resort hotels in Honolulu. Benaglia’s role required him to be continuously on duty and available at a moment’s notice to address guests’ needs. Hawaiian Hotels and Benaglia agreed that the proper performance of Benaglia’s responsibilities required him to live and dine onsite. Consequently, Hawaiian Hotels provided Benaglia and his wife with a suite at one of the hotels and also provided their meals. The arrangement was separate from Benaglia’s salary and was viewed as a requirement of Benaglia’s position rather than as compensation for his services.

When the Benaglias filed their joint tax returns in 1933 and 1934, they didn’t include the value of the employer-provided meals and lodging in their gross income. But the commissioner of internal revenue determined that the fair market value of the meals and lodging should’ve been included. The commissioner valued the meals and lodging at seven thousand eight hundred forty-five dollars per year and added that amount to the Benaglias’ gross income for 1933 and 1934. The commissioner then sought to recover additional taxes from the Benaglias based on their increased gross income.

The Benaglias appealed the commissioner’s determination to the Board of Tax Appeals, arguing that the meals and lodging shouldn’t have been included in their gross income because they were provided solely for the employer’s convenience.

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