39. Bills Corporation runs a defense contracting business that requires security clearance. To prevent unauthorized access to its materials, Bills requires its security personnel to be on duty except for a 15-minute break every two hours. Since the nearest restaurants are a 25-minute round trip, Bills provides free lunches to its security personnel. Bills has never included the value of these meals in its employees’ compensation.

Bills is currently under audit, and the IRS agent wants to deny Bills a deduction for past meals.

The agent also wants Bills to begin including the value of the meals in employee compensation starting with the current year. As Bills’s tax adviser, provide a recommendation on whether to appeal the agent’s decision.

(Hint: See Boyd Gaming Corp., CA-9, 99-1 USTC ¶50,530 (Acq.), 177 F3d 1096.)