The Tax Court ruled in a recent case that free airline tickets did not qualify for a tax-free statutory fringe benefit. Ken Berry explains the taxpayer's argument and why the court disagreed on the tax exclusion.
In a new Tax Court case, Mihalik, C Memo 2022-36.4/13/22, a retired pilot took advantage of a special program of his former employer that provided free airline tickets on a stand-by basis. Although the value of such benefits may qualify for a tax-free statutory fringe benefit, the Tax Court refused to give clearance in this instance.
Generally, the cost of de minimis fringe benefits is exempt from federal income tax. This occurs when it is impractical or unreasonable for an employer to keep track of relatively small benefits. It may range from use of the company fax machine or copier for personal reasons to free coffee, soft drinks or donuts in the office. Also, the value of no-additional cost services may be exempt from tax. A “no-additional cost service” is
(1) provided by an employer to an employee
(2) at no substantial additional cost to the employer
(3) for use by the employee; and
(4) is offered for sale to customers or clients in the normal course of business.
Register for free to continue reading
It’s 100% free and provides unlimited access to the latest accounting news, advice and insight every day. As well as access to this exclusive article, you can:
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...