Herbert G. Hatt v. Commissioner

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Brief Fact Summary.

Hatt lived in an apartment on the premises of funeral home that he was president and general manager of. He excluded the value of the apartment from his gross income claiming that is was an allowable exclusion of an employee benefit.

Synopsis of Rule of Law.

Lodging may excluded from gross income if the lodging is on the business premises, the employee is required to accept it, and it is furnished for the convenience of the employer.

Facts.

Hatt opened a sewing center business in 1955. He sold sewing machines. He became acquainted with Dorothy Echols, the president and majority stockholder of Johan corporation. Johan corporation operated a funeral home and embalming business.. Hatt and Echols were married. She agreed to transfer to him the majority of shares of the corporation as part of an antenuptial agreement, and he became president and general manager. Hatt moved into an apartment in the same building as the funeral home. He often conducted business from their as was customary for a funeral home.

Issue.

Should Hatt be allowed to exclude the apartment from gross income?

Held.

The Tax Court found that the exclusion is allowable.

Discussion.

The Tax Court noted that the nature of the funeral business required twenty-four hour supervision, a designated employee lived on the premises of every other funeral business in town, he took calls and handled business in the apartment, and Dorothy Echols had lived there for years with the same arrange