106 T.C. No. 19
UNITED STATES TAX COURT
BOYD GAMING CORPORATION, f.k.a. THE BOYD GROUP AND SUBSIDIARIES, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CALIFORNIA HOTEL AND CASINO AND SUBSIDIARIES, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 3433-95, 3434-95. Filed May 22, 1996.
Ps provided “free” meals to their employees in private cafeterias located on their business premises. R determined that sec. 274(n)(1), I.R.C., limits Ps’ deduction for the cost of these meals. R moves for partial summary judgment in her favor. Ps object to R’s motion, arguing that they may deduct 100 percent of their cost under the de minimis fringe benefit exception of sec. 274(n)(2)(B), I.R.C., and that the applicability of this exception is a factual determination that has yet to be made. Ps also move for partial summary judgment in their favor, arguing that they may deduct 100 percent of the meals’ cost under the bona fide sale exception of sec. 274(e)(8), I.R.C. Held: Ps may deduct 100 percent of the meals’ cost if they are within the de minimis fringe benefit exception of sec. 274(n)(2)(B), I.R.C., and whether they are within this exception is an unanswered question of fact. Held, further: Ps’ provision of the meals is not within sec. 274(e)(8), I.R.C. - 2 -
Thomas P. Marinis, Jr. and J. Barclay Collins III, for
petitioners.
Paul L. Dixon, for respondent.
OPINION
LARO, Judge: These consolidated cases are before the Court
on cross-motions for partial summary judgment.1 Respondent moves
for partial summary judgment in her favor, arguing that section
274(n)(1) limits petitioners’ deductions for the cost of “free”
food and beverages that they provided to their employees on
petitioners’ business premises.2 Petitioners object to
respondent’s motion, arguing that a genuine issue of fact exists
as to the applicability of an exception to section 274(n)(1);
namely, whether the food and beverages are a de minimis fringe
benefit under section 274(n)(2)(B). Petitioners also move for
partial summary judgment in their favor, arguing that section 274(n)(1) does not apply because petitioners "sold * * * [the
food and beverages to their employees] in a bona fide transaction
for an adequate [and full] consideration in money or money's
worth".3 See sec. 274(e)(8), (n)(2)(A). Respondent replied to
1 On Nov. 7, 1995, the Court granted the unopposed motion of respondent to consolidate the two cases for purposes of trial, briefing, and opinion. 2 Respondent supports her motion with only the pleadings. 3 Petitioners’ cross-motion is supported by the affidavit of (continued...) - 3 -
petitioners’ notice of objection, and she objected to
petitioners’ cross-motion.4
We hold that petitioners may deduct 100 percent of the cost
of the food and beverages provided to their employees, if the
food and beverages are within the de minimis fringe benefit
exception of section 274(n)(2)(B). Whether petitioners are
within this exception is a factual determination that is yet to
be made. We also hold that petitioners’ provision of the food
and beverages is not within section 274(e)(8).
Unless otherwise stated, section references are to the
Internal Revenue Code in effect for the years in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
We refer to Boyd Gaming Corp., f.k.a. the Boyd Group and
Subsidiaries, and California Hotel and Casino and Subsidiaries as
Boyd and CHC, respectively.
Background5
Boyd and CHC are Nevada corporations whose principal offices
were in Las Vegas, Nevada, when they petitioned the Court. For
its taxable year ended June 30, 1988 (the 1987 taxable year), CHC
was the common parent of an affiliated group of corporations that
(...continued) one of their senior vice presidents. 4 Respondent’s objection is unaccompanied by supporting affidavits. 5 The “facts” presented in this Opinion are stated solely for purposes of deciding the motion and are not findings of fact for this case. Fed. R. Civ. P. 52(a); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994). - 4 -
filed a consolidated Federal income tax return. CHC’s affiliated
group in its 1987 taxable year included: (1) Mare-Bear, Inc.,
doing business as Stardust Hotel & Casino (Stardust) and
(2) Sam-Will, Inc., doing business as Fremont Hotel & Casino
(Fremont). CHC sometimes did business as Sam’s Town Hotel
& Gambling Hall (Sam’s Town).
For its taxable year ended June 30, 1989 (the 1988 taxable
year), Boyd was the common parent of an affiliated group of
corporations that filed a consolidated Federal income tax return.
Boyd's affiliated group in its 1988 taxable year included: (1)
CHC, which sometimes did business as Sam’s Town, (2) Mare-Bear,
Inc., doing business as Stardust, and (3) Sam-Will, Inc., doing
business as Fremont.
At all times relevant herein, CHC, Stardust, Fremont, and
Sam's Town (collectively referred to as the Properties) were
located in Las Vegas, Nevada. Each of the Properties was a
resort complex that had casino, hotel, and restaurant facilities.
Some of the Properties had convention or amusement facilities.
Each of the Properties had an employee cafeteria that was located
on its premises. The cafeterias (Cafeterias) were separate from
the public restaurants that were located on the Properties. The
Cafeterias were used by petitioners to serve hot meals, cold
foods, and snacks (collectively referred to as the meals) to only
their employees.
Petitioners provided the meals to all of their on-duty
employees, except for a small group of individuals who were - 5 -
allowed to eat in designated areas of the Properties’ public
restaurants, during the employees’ work shifts. Petitioners
provided the meals without any out-of-pocket cost to the
employees. Petitioners provided the meals for a variety of
operational reasons. Petitioners’ provision of the meals was not
discriminatory in favor of highly compensated employees.
Most, if not all, of the casinos in Las Vegas provided meals
to their employees during the relevant years. In order to
attract and keep employees, petitioners offered packages of
compensation and benefits that were competitive in the
marketplace. Meal benefits during an employee’s shift were
included in commonplace packages.6 In consideration for the meal
benefits, petitioners were able to require their employees to
stay on the Properties’ premises during their entire shift.
An employee who left the premises during his or her shift,
without authorization, was subject to disciplinary action up to
and including discharge.
For the subject years, the Commissioner disallowed
20 percent of the deductions that petitioners reported for the
cost of their employees’ meals. According to the notices of
deficiency, section 274(n) prohibits petitioners from deducting
20 percent of the meals’ cost. In its petition, CHC alleges that
it did not deduct 20 percent of the meals’ cost for its 1987
taxable year, and that it was entitled to do so.
Discussion
6 Sometimes, meal benefits were required by union contracts. - 6 -
The issue at hand is one of first impression. We must
decide whether petitioners can deduct the full cost of the meals
that they provided to their employees on their premises, or,
alternatively, whether section 274(n)(1) limits their deduction
to 80 percent of the meals’ cost. Petitioners argue for the
former, stating that section 274(n)(1) does not limit their
deduction because their employee meals are: (1) De minimis
fringe benefits under sections 132(e) and 274(n)(2)(B), or
(2) goods sold in a bona fide transaction for an adequate and
full consideration in money or money's worth under section
274(e)(8). Respondent argues for the latter, stating that none
of the exceptions to section 274(n)(1) apply to the facts at hand
because petitioners provided the meals to their employees without
charge.
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials of phantom factual issues.
Kroh v. Commissioner, 98 T.C. 383, 390 (1992); Shiosaki v.
Commissioner, 61 T.C. 861, 862 (1974). The concept of summary
judgment is specifically recognized by this Court and is deeply
ingrained in our procedural rules. Rule 121(a) provides that
either party may move for summary judgment in its favor upon any
or all parts of the legal issues in controversy. When either
party makes such a motion, the opposing party must file "An
opposing written response, with or without supporting affidavits,
* * * within such period as the Court may direct." Rule 121(b).
A decision on the merits of a taxpayer's claim will then be - 7 -
rendered by way of summary judgment "if the pleadings, answers to
interrogatories, depositions, admissions, and any other
acceptable materials, together with the affidavits, if any, show
there is no genuine issue as to any material fact and that a
decision may be rendered as a matter of law." Id.
Because summary judgment decides an issue against a party
without the benefit of a trial, the Court grants such a remedy
cautiously and sparingly, and only after carefully ascertaining
that the moving party has met the requisite criteria.
Associated Press v. United States, 326 U.S. 1, 6 (1945);
Espinoza v. Commissioner, 78 T.C. 412, 416 (1982). The Court
will not resolve disagreements over material factual issues in a
summary judgment proceeding. Espinoza v. Commissioner, supra at
416; Matson Navigation Co. v. Commissioner, 67 T.C. 938, 951
(1977). A fact is material if it "tends to resolve any of the
issues that have been properly raised by the parties." 10A
Wright et al., Federal Practice and Procedure: Civil, sec. 2725,
at 93 (2d ed. 1983). The moving party must prove that there is
no genuine issue of material fact, and factual inferences are
viewed in the light most favorable to the nonmoving party.
United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); Kroh v. Commissioner, supra at 390; Preece v. Commissioner, 95 T.C. 594,
597 (1990). - 8 -
We start our inquiry with the relevant text of section
274(n).7 Connecticut Natl. Bank v. Germain, 503 U.S. 249,
253-254 (1992); TVA v. Hill, 437 U.S. 153 (1978); United States
v. American Trucking Associations, 310 U.S. 534, 543-544 (1940).
Section 274(n) provides in part:
(1) In general.--The amount allowable as a deduction under this chapter for--
(A) any expense for food or beverages, and
* * * * * * *
shall not exceed 80 percent [8] of the amount of such expense or item which would (but for this paragraph) be allowable as a deduction under this chapter.
(2) Exceptions.--Paragraph (1) shall not apply to any expense if--
(A) such expense is described in paragraph * * * (8) * * * of subsection (e).[9]
(B) in the case of an expense for food or beverages, such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes),
From this text, we find that the mandate of the Congress is
clear. Petitioners may not deduct the full cost of their
7 Sec. 274(n) was added to the Code on Oct. 22, 1986, as sec. 142(b) of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, 2118. 8 Sec. 13,209(a) of the Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, 107 Stat. 312, 469, changed this amount to 50 percent for taxable years beginning after Dec. 31, 1993. 9 Sec. 274(e)(8) provides an exception for "Expenses for goods or services * * * which are sold by the taxpayer in a bona fide transaction for an adequate and full consideration in money or money's worth.” - 9 -
employees’ meals unless the meals are: (1) De minimis fringe
benefits under section 132(e) or (2) sold by petitioners in a
bona fide transaction for an adequate and full consideration in
money or money's worth.
Turning first to the de minimis fringe benefit exception,
we find that employee meals provided on a nondiscriminatory basis
are a de minimis fringe benefit under section 132(e) if: (1) The
eating facility is owned or leased by the employer, (2) the
facility is operated by the employer, (3) the facility is located
on or near the business premises of the employer, (4) the meals
furnished at the facility are provided during, or immediately
before or after, the employee’s workday, and (5) the annual
revenue derived from the facility normally equals or exceeds the
direct operating costs of the facility (the revenue/operating
cost test). Sec. 132(e)(2); sec. 1.132-7(a), Income Tax Regs.
The parties do not dispute the applicability of this
five-prong test, and they do not dispute that the first four
prongs have been met. The parties focus on the fifth prong;
i.e., the revenue/operating cost test. For purposes of this
test, an employer may disregard the cost and revenue for any
employee meal that the employer reasonably determines is
excludable from gross income under section 119. Sec.
1.132-7(a)(2), Income Tax Regs.10 Section 119(a)(1) allows an
10 The rule of sec. 1.132-7(a)(2), Income Tax Regs., that disregards the cost and revenue of sec. 119 meals was originally prescribed in sec. 1.132-7T(a)(2), Temporary Income Tax Regs., 50 Fed. Reg. 52309 (Dec. 23, 1985). - 10 -
employee to exclude from income the value of any meals furnished
by an employer for the employer’s convenience and on the
employer’s premises. Commissioner v. Kowalski, 434 U.S. 77,
84 (1977). Employee meals furnished without a charge on the
employer’s premises are considered to be within section 119 if
the employer furnished the meals for a “substantial
noncompensatory business reason”, the presence of which is a
factual determination. Sec. 1.119-1(a)(2)(i), Income Tax Regs.
In making this determination, we are guided by section
1.119-1(a)(2)(ii), Income Tax Regs., which lists examples of
substantial noncompensatory business reasons. We are also guided
by a directive in respondent’s regulations that all employee
meals are considered furnished for a substantial noncompensatory
business reason if the employer: (1) Furnished the meals at its
place of business and (2) had a substantial noncompensatory
business reason for furnishing the meals to each of substantially
all of the employees who were furnished the meals. Sec.
1.119-1(a)(ii)(e), Income Tax Regs.
Respondent argues that petitioners cannot meet the
revenue/operating cost test because they earned no revenue on the
employee meals. Respondent claims that section 1.132-7(a)(2),
Income Tax Regs., applies only when employees pay for their
meals, some of which are excludable from gross income under
section 132(e) and the rest of which are excludable under section
119. Respondent claims that the Congress intended to allow a
full deduction for employee meals only when the meals were - 11 -
provided in a facility that normally makes an overall profit, and
that the Congress did not intend for section 274(n)(2)(B) to
apply to meals covered by section 119. Respondent relies
primarily on two excerpts from the committee reports to section
274(n)(1). The first excerpt states that “20 percent of an
otherwise allowable deduction for food and beverages * * * is
disallowed. Similarly, the cost of a meal furnished by an
employer to employees on the employer’s premises is subject to
the rule.” S. Rept. 99-313, at 70 (1985), 1986-3 C.B. (Vol. 3)
1, 70; H. Rept. 99-426, at 123 (1985), 1986-3 C.B. (Vol. 2) 1,
123. The second excerpt states that “The bill generally reduces
to 80 percent the amount of any deduction otherwise allowable for
meal expenses, including meals * * * furnished on an employer’s
premises to its employees (whether or not such meals are
excludable from the employee’s gross income under sec. 119).”
H. Conf. Rept. 99-841, at II-24 to II-25 (1986), 1986-3 C.B.
(Vol. 4) 1, 24-25. Respondent also relies on the fact that
section 274(e)(1) refers to food and beverages furnished on an
employer’s business premises primarily for its employees.
Respondent argues that section 274(n)(2) would have referred to
section 274(e)(1), had the Congress intended to except employee
meals from the limitation of section 274(n)(1).
We disagree with respondent’s broad reading of section
274(n)(1). In support of her reading, respondent refers us to
two excerpts of legislative history. Respondent takes both
excerpts out of their context. The first excerpt is listed under - 12 -
the caption “in general”. Immediately thereafter, under the
caption “Exceptions to percentage reduction rule”, the reports
state that “The bill provides certain exceptions to the
applicability of the percentage reduction rule. First, the cost
of a meal * * * is fully deductible if the full value * * * is
excludable under section 132, pursuant to either the subsidized
eating facility exclusion or the exclusion for de minimis fringe
benefits.” S. Rept. 99-313, supra at 71, 1986-3 C.B. (Vol. 3)
at 71; H. Rept. 99-426, supra at 124, 1986-3 C.B. (Vol. 2) at
124. The same is true with respect to the second excerpt.
Reading on from the language to which respondent has referred us,
we find that the report goes on to discuss the same two
exceptions that respondent would have us ignore today. H. Conf.
Rept. 99-841, supra at II-25, 1986-3 C.B. (Vol. 4) at 25.
Based on our reading of all the legislative history, we find
that the excerpts on which respondent relies do not stand for the
broad proposition that she espouses. The excerpts are merely
broad rules that are limited by language that follows immediately
thereafter. Unlike respondent, we do not read the legislative
history to foreclose the complete deduction of employee meals in
100 percent of the cases.11 Petitioners’ deduction for their
employee meals would not be limited by section 274(n)(1), for
example, if section 119 allows all of petitioners’ employees to
exclude the value of the meals from their gross income. In such
11 We also place less weight than respondent on the fact that the Congress did not include sec. 274(e)(1) in its list of exceptions under sec. 274(n)(2). - 13 -
a case, the de minimis fringe benefit exception of sections
132(e) and 274(n)(2)(B) will allow petitioners to claim a
complete deduction for the meals because the Cafeterias’ revenues
and expenses will both be zero for purposes of the
revenue/operating cost test.
Respondent is mistaken when she boldly asserts that the
Congress did not want section 119 to apply to determinations
under section 274(n)(2)(B). The incorporation of section 119
into the de minimis fringe benefit exception of section 132(e)
first appeared in section 1.132-7T(a)(2), Temporary Income Tax
Regs., 50 Fed. Reg. 52309 (Dec. 23, 1985), which was published
before section 274(n)(2)(B) came into law. According to a
longstanding, well-established “benign fiction” of statutory
construction, we assume that the Congress knew of this
incorporation when it promulgated section 274(n)(2)(B). Green v.
Bock Laundry Mach. Co., 490 U.S. 504, 528 (1989) (Scalia, J.,
concurring in judgment); see Lindahl v. OPM, 470 U.S. 768, 783
n.15 (1985); Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Curran, 456 U.S. 353, 382 n.66 (1982); Lorillard v. Pons, 434
U.S. 575, 580-581 (1978); Sohappy v. Hodel, 911 F.2d 1312, 1317 (9th Cir. 1990); Kovacs v. Commissioner, 100 T.C. 124,
129-130, 133 (1993), affd. 25 F.3d 1048 (6th Cir. 1994). With
regard to the statement in the conference report that deductions
for meal expenses are reduced to 80 percent “whether or not such
meals are excludable from the employee’s gross income under sec.
119”, H. Conf. Rept. 99-841, supra at II-24 to II-25, 1986-3 C.B. - 14 -
(Vol. 4) at 24-25, we do not find this statement to be
disharmonious with our reading of the statutory text. Although
we need not and do not pass on the breadth of this statement, one
reasonable interpretation is that the entire cost of a
section 119 meal is not deductible when the meal is outside of
the de minimis fringe benefit exception of section 132(e).
We find further support for our reading in the reason for
section 274(n)(1). The Congress included section 274(n)(1) in
the Tax Reform Act of 1986, Pub. L. 99-514, sec. 142(b),
100 Stat. 2085, 2118, primarily to address their concern that the
then-present law unfairly allowed high-income taxpayers to
structure their business affairs in a way that generated
deductions for personal expenses such as meals. As stated by the
committees, with respect to the need for a change in the
then-present law,
Since the 1960's, the Congress has sought to address various aspects of deductions for meals, entertainment, and travel expenses that the Congress and the public have viewed as unfairly benefiting those taxpayers who were able to take advantage of the tax benefit of deductibility. In his 1961 Tax Message, President Kennedy reported that “too many firms and individuals have devised means of deducting too many personal living expenses as business expenses, thereby charging a large part of their cost to the Federal Government.” He stated: “This is a matter of national concern, affecting not only our public revenues, our sense of fairness, and our respect for the tax system, but our moral and business practices as well.”
The committee shares these concerns, and believes that these concerns are not addressed adequately by present law. * * *
The committee believes that present law, by not focusing sufficiently on the personal-consumption element of deductible meal and entertainment expenses, - 15 -
unfairly permits taxpayers who can arrange business settings for personal consumption to receive, in effect, a Federal tax subsidy for such consumption that is not available to other taxpayers. The taxpayers who benefit from deductibility under present law tend to have relatively high incomes, and in some cases the consumption may bear only a loose relationship to business necessity. For example, when executives have dinner at an expensive restaurant following business discussions and then deduct the cost of the meal, the fact that there may be some bona fide business connection does not alter the imbalance between the treatment of those persons, who have effectively transferred a portion of the cost of their meal to the Federal Government, and other individuals, who cannot deduct the cost of their meals.
The significance of this imbalance is heightened by the fact that business travel and entertainment often may be more lavish than comparable activities in a nonbusiness setting. For example, meals at expensive restaurants and season tickets for luxury boxes at sporting events are purchased to a significant degree by taxpayers who claim business deductions for these expenses. This disparity is highly visible, and contributes to public perceptions that the tax system is unfair. Polls indicate that the public identifies the deductibility of normal personal expenses such as meals to be one of the most significant elements of disrespect for and dissatisfaction with the present tax system.
In light of these considerations, the committee bill reduces by 20 percent the amount of otherwise allowable deductions for business meals and entertainment. This reduction rule reflects the fact that meals and entertainment inherently involve an element of personal living expenses * * *. [H. Rept. 99-426, supra at 120-121, 1986-3 C.B. (Vol. 2) at 120-121.]
See also S. Rept. 99-313, supra at 67-68, 1986-3 C.B. (Vol. 3)
at 67-68.
Respondent’s proffered interpretation of section 274(n)(1)
stands in marked contrast to the abusive situations that spawned
that section. In contrast with the abuses that the Congress
meant to address in enacting section 274(n)(1), we see no abuse - 16 -
that would be curtailed by denying petitioners a full deduction
for the cost of their employee meals. Indeed, petitioners’
provision of employee meals is a far stride from the abuses that
the Congress chose to address in their promulgation of section
274(n)(1). We recognize that the Congress enacted that section
out of their concern for taxpayers’ deducting expenses, such as
meals, that were inherently personal. All the same, we do not
read section 274(n)(1) to disallow a full deduction for the cost
of “free” employee meals 100 percent of the time.
In short, section 274(n)(2) will allow petitioners to deduct
the entire cost of their employee meals if the meals are a de
minimis fringe benefit under section 132(e). Thus, petitioners
may deduct the meals’ full cost if they reasonably determine that
the meals are excludable from their employees’ incomes under
section 119. Sec. 1.132-7(a)(2), Income Tax Regs.12 To the
extent that respondent believes that the de minimis fringe
benefit exception is inapplicable because the meals were
furnished free of charge, we disagree. Neither the text of
section 274 nor its legislative history persuades us that the
de minimis fringe benefit exception applies only to cafeterias
12 We recognize that our incorporation of sec. 119 into the de minimis fringe benefit exception of sec. 274(n)(2)(B) rests solely on sec. 1.132-7(a)(2), Income Tax Regs. Respondent acknowledges that these regulations literally apply to sec. 274(n)(2)(B), but argues that she did not intend for this literal application. Respondent asks the Court to adopt a rule that would limit these regulations to determinations under sec. 132. We refuse to do so. To the extent that respondent wants to limit the plain meaning of the words inscribed in an income tax regulation, she (and not the Court) must prescribe the limitation. - 17 -
that charge a fee for their meals. Accordingly, we will deny
respondent’s motion for partial summary judgment in her favor,
and we will set this case for trial to determine whether
petitioners qualify for the de minimis fringe benefit exception
to section 274(n)(1). In denying respondent’s motion, we have
considered all arguments made by her and, to the extent not
discussed above, have found them to be without merit.
Turning to petitioners’ argument in support of judgment in
their favor, section 274(e)(8) provides an exception for
"Expenses for goods or services * * * which are sold by the
taxpayer in a bona fide transaction for an adequate and full
consideration in money or money's worth.” Petitioners argue that
the meals fall within this statutory language. Petitioners argue
that they sell the meals to their employees in consideration for
the employees’ services and the employees’ promises not to leave
petitioners’ business premises during breaks.
We are not persuaded by petitioners’ arguments on section
274(e)(8). Put simply, we do not believe that petitioners sold
the meals to their employees in a bona fide transaction for
adequate and full consideration. We believe that petitioners
merely presented the meals to their employees in connection with
the employees’ employment with petitioners. To say the least, we
are sure that petitioners’ employees would be surprised to hear
that they were paying arm’s-length, fair market value prices for
the meals. Yet, this is the holding that petitioners would have
us reach. Such a holding is unsupported by the record and is - 18 -
contrary to common sense.13 Indeed, bearing in mind that
petitioners’ Federal income tax returns report no sale revenues
for their alleged sales of meals to their employees, petitioners’
reporting of these meals supports our conclusion. We also note
that petitioners’ memorandum of law states that petitioners
provide these meals to their employees at “no charge”.
We hold that petitioners’ provision of the meals is not
within section 274(e)(8). In so holding, we have considered all
arguments made by petitioners for a contrary holding and, to the
extent not discussed above, have found them to be without merit.
To reflect the foregoing,
An appropriate order
denying both motions for
partial summary judgment will
be issued.
13 As we understand petitioners’ argument, they sold the meals to their employees at cost. Whereas a willing buyer would be delighted to purchase a meal at cost, very few (if any) willing sellers would be able to stay in business if they continued to sell the meals at cost.