## Facts

- Two married couples employed by the Forest Preserve District of Cook County, Illinois worked as resident watchmen assigned to protect designated forest preserve lands.
- The District owned extensive acreage across the county and used rangers for patrols, but staffing was insufficient to cover all areas and hours.
- To provide continuous on-site protection and emergency response, the District required resident watchmen to live in employer-provided houses located within their assigned preserve areas.
- The watchmen lived in the houses rent-free and performed duties such as patrolling for fires, hunters, vandalism, dumping, and encroachments, and responding to calls when rangers were unavailable.
- For tax years 1972–1974, the couples did not include the fair rental value of the lodging in gross income.
- The Commissioner determined deficiencies, asserting the lodging value was taxable and disallowing certain claimed deductions by the Vaniceks for operating and maintaining the residence.

## Issues

1. Whether the fair rental value of employer-provided lodging was excludable from gross income under I.R.C. § 119.
2. Whether the Vaniceks could deduct expenses of operating and maintaining the employer-provided residence as ordinary and necessary business expenses under I.R.C. § 162.

## Decision

- The Tax Court held the fair rental value of the lodgings was excludable under I.R.C. § 119.
- The court found the lodging was furnished for the employer’s convenience, located on the employer’s business premises, and required as a condition of employment.
- The court distinguished *Benninghoff v. Commissioner*, concluding the District’s business premises included the preserve lands that were the object of its operations and protection.
- The Tax Court denied the Vaniceks’ claimed § 162 deductions for operating and maintaining the residence.

## Legal Principles

- Under I.R.C. § 119, lodging is excludable from an employee’s gross income if it is (1) furnished for the employer’s convenience, (2) on the employer’s business premises, and (3) required as a condition of employment.
- “Business premises” may include nontraditional worksites when the employer’s principal operations concern the land itself and the employee’s on-site presence is integral to those operations.
- Housing required to enable prompt emergency response and continuous supervision for an employer with insufficient alternative staffing may satisfy the “convenience of the employer” and “condition of employment” requirements.
- Exclusion of lodging value under § 119 does not make general residence operating and maintenance costs deductible; § 162 requires proof that claimed costs are ordinary and necessary business expenses rather than personal living expenses.

## Conclusion

The Tax Court permitted resident watchmen to exclude the fair rental value of mandatory, on-site employer housing under § 119 because it was on the District’s business premises and served the District’s operational needs, but it disallowed deductions for residence-related expenses under § 162 as insufficiently business in character.


Vanicek v. Commissioner, 85 T.C. 731 (1985)