dissenting: Section 119 of tlie 1954 Code permits tlie exclusion from taxable income of the rental value of lodging furnished the petitioners by their employer only in case such lodging was located on the business premises of the employer, and their living in such premises was required as a condition of their employment and was for the employer’s convenience. The majority have denied the exclusion of such rental values here on two grounds: First, that the petitioners’ occupancy of company-owned residences was not required by their employer as a condition of their employment and, secondly, that the residences do not comply with the statutory provision that they be located upon its “business premises.” I am impelled to dissent on both grounds.
With respect to all three employees the findings as to the reason for their occupancy of company-owned residences were in part that their employer stated they would each “have to move into a company-owned house.” There is no dispute that this was “for the convenience of the employer.” To hold that it was not “required” by him as a condition of employment in view of the indicated finding is to me incredulous. The only reasonable conclusion I am able to draw from the finding is that the employees’ refusal to occupy the residences would have resulted in their not being employed.
This statute was designed to exclude from taxable income what would otherwise constitute compensation for services rendered and be taxable as ordinary income under section 61(a) of the Code. A safeguard was there provided to assure that even though lodgings such as these were occupied by employees for their employer’s convenience, the rental value thereof would escape taxation to the employees only if the lodgings constituted business premises of the employer. These residences were not located on the manufacturing premises of the company, but they nevertheless were clearly “business premises” in nature when that term is viewed in the light of all the provisions of section 119 in lieu of separately as has been done by the majority. That the residences were owned by the employer is clear. That the employer owned them for business purposes is also clear to me if it be conceded that management constitutes the conduct of business as surely as a manufacturing procedure. To manage the affairs of this employer it was necessary that petitioners forego their personal freedom from business affairs during the hours of each day subsequent to their normal working period. Their living in company-owned and designated dwellings so that they were available for work throughout each 24-hour period was part and parcel of the management of their employer and as such constituted the conduct of business.
In light of the fact that the word “premises” as used in the statute must under the usual rules of statutory construction be construed to apply universally to all businesses, it is difficult for me to believe that Congress intended, without specifically saying so, to nevertheless limit the meaning of the word to a single integral compound or close.
To constitute compensation for services rendered, lodgings furnished by an employer must be occupied by an employee in the same manner as would be the case were they provided at his own expense in a location of his own choosing. Except of his own volition, he would not in the latter case be subject to call at any time during his off hours and such lodgings could be at any location he desired. Here, although two petitioners owned homes located in the same general area as the place of their employment, on pain of losing their employment, they had no choice of living either there or in the company-owned residences. They were, in a sense, carrying out the duties of their employment even during their off-duty hours. This they were doing at the insistence of their employer, for its convenience and as a condition (reasonable it seems to me) of continuing to be employed.
The exclusions in each docket should be permitted. See Charles N. Anderson, 42 T.C. 410 (1964), on appeal (C.A. 6), which in my view is correctly decided, is indistinguishable on its facts from those before us, and is controlling of this issue.
FoeresteR, agrees with this dissent.