Nature of the Case
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Facts
P is an Air Force veteran and engineer who, in September 2009, received an offer of employment from the Raytheon Company to work as an engineer at Alice Springs, Northern Territory, Australia (Pine Gap). received a copy of Raytheon's Australian Operations Overseas Handbook. The handbook informed P that he was eligible for housing in Alice Springs. 'All employees transferred to Alice Springs are provided good quality [Pine Gap] housing. The employee is responsible for IRS taxable income on the local market rental value of furnished housing and the associated utilities. Additional information on the tax impact of [Pine Gap] housing can be found in the Taxes section elsewhere in this Handbook.' The handbook informed P of alternative housing assistance options. Regarding the income tax treatment of P's housing, the Raytheon handbook stated as follows: P's Housing Accommodation was approximately 11 miles from his place of work. Mr. Smith also performed some work from home. For example, he completed training programs at home, maintained his time sheets, and completed employee evaluations. The training programs were in part voluntary and in part mandatory. Raytheon provided Mr. Smith with a key fob, also known as a hardware token, enabling him to remotely access its secured network from outside the workplace. If any U.S. or foreign visitors stayed with Mr. Smith, he was required to alert the Pine Gap Security Office. P received from the Secretary of the Air Force a Form 1099-MISC, Miscellaneous Income, reporting as nonemployee compensation the value of his Housing Accommodation. The amounts reported for 2016, 2017, and 2018 were $15,889, $15,501, and $10,015, respectively. P reported on his tax returns, in relevant part, gross receipts of $15,889 for 2016 and $15,501 for 2017 on Schedule C-EZ, Net Profit From Business. These amounts represented the value of Mr. Smith's Housing Accommodation as reported by the Secretary of the Air Force on Forms 1099-MISC. P reported on his tax returns, in relevant part, gross receipts of $15,889 for 2016 and $15,501 for On an Amended P again reported as gross receipts the value of the Housing Accommodation shown on the Forms 1099-MISC for 2016 and 2017 ($15,889 and $15,501, respectively). But he also claimed corresponding deductions for 'employee benefit programs' in amounts equal to the value of the Housing Accommodation, which had the effect of excluding the value of the Housing Accommodation from his gross income. P reported in his 2018 return gross receipts equal to the value of his Housing Accommodation reflected on Form 1099-MISC ($10,015) and then claimed a corresponding deduction for employee benefit programs, which again had the effect of excluding the value of the Housing Accommodation from his gross income.
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