In its “fringe benefit” regulations under IRC Section 132, the IRS gives detailed guidance on how to deduct the “on-premises athletic facility,” which means any gym or other athletic facility (such as a pool, tennis court, or golf course).1

In its “recreational expenses for employees generally” regulations under IRC Section 274, the IRS gives guidance on how the business may provide its employees with tax-free recreational facilities such as a swimming pool, baseball diamond, bowling alley, or golf course.2

Oops, a conflict. When you have regulations from two different tax code sections as we do above, which set do you follow? We’ll get to that and show you exactly what you need to do.

But first, you might wonder why this is a big deal. Imagine that you are one of our tax researchers tasked with examining the nondiscrimination rules that apply to an employee gym and you run across this:

According to Lexis Tax Advisor, you can make the gym benefit available on an executive-only basis.3

According to PPC Compensation Planning for Small Business, you must make the gym benefit available primarily to employees who are not highly compensated or owners.4

Wow. That’s a really huge difference: executives only or primarily rank and file. And these are highly respected tax research services. Which one is correct, and what should you do? ... Log in to view full article.