Irc Sec 132 Summary

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The final section discussing the exclusion of employer-provided meals from the employees’ income is IRC Sec. 132(e). This section discusses fringe benefits, which are excluded from the gross income of employees. Applicable to this study, the section describes de minimis fringe benefits and the proper treatment of meals provided to employees using employer operated eating facilities, such as cafeterias. According to IRC Sec. 132(e)(1), de minimis fringe benefits are “so small as to make accounting for it unreasonable or administratively impractical.” This applies to benefits such as coffee, soda, or small breakfast items. Meals or meal money are excludable from employee income as a de minimis fringe benefit if it satisfies the following conditions:…show more content…
132(e)(2) also discusses the proper treatment of employer operated eating facilities, such as a cafeteria. One major stipulation to employer-operated eating facilities is that the “revenue from the facility must equal or exceed the direct operating costs of such facility.” There are also four major conditions required: the eating facility is owned or leased by the employer, operated by the employer, located on or near business premises, and the meals are provided during or immediately before and after work (Reg. 1.132-7). One exception is that these meals cannot be excluded from the income of highly compensated employees unless the facility is providing meals to all employees or a group of employees that the company has defined to favor highly compensated employees (Publication 15-B). Publication 15-B defines highly compensated employees as either a 5% owner of the company or an employee that received more than $115,000 the preceding year. The second test can be disregarded if the employee was not in the top 20% of the employees ranked by…show more content…
One example of this scenario is the case of Karl and Kathleen Christey v. United States, 841 F2d 809. In this case, Minnesota police officers were permitted to claim their meal expenses while on duty as a business expense deduction. The officers were required to remain on duty during the meals and in many cases, required to leave before finishing the meals. There were also additional restrictions to when the officers could eat, whether they could eat in their cars, and whether they could bring food from home. Due to the meal restrictions, the officers’ meals were deemed for the “convenience and benefit of the patrol” and were accordingly deductible as an ordinary and necessary business expense. This case showed that there is often question on whether or not a meal is deductible as a business expense, and that as long as the meal is an ordinary and necessary business expense and does not fall under the category of personal expenses excluded by IRC Sec. 262, the meals are deductible under IRC Sec.

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