SCOTUS Reports

Tag: commuting expenses

  • Pollei v. Commissioner, 87 T.C. 869 (1986): Commuting Expenses Remain Nondeductible Despite ‘On-Duty’ Status

    Pollei v. Commissioner, 87 T. C. 869 (1986)

    Commuting expenses between home and work are not deductible, even if the employee is considered ‘on duty’ during the commute.

    Summary

    In Pollei v. Commissioner, police captains Jon R. Pollei and Harry W. Patrick sought to deduct vehicle operating costs for travel between their homes and police headquarters, arguing that they were ‘on duty’ during these commutes due to a police department policy. The Tax Court ruled against them, holding that commuting remains a nondeductible personal expense under IRC sections 162 and 262. The court emphasized that the police department’s designation of the commute as part of the officers’ ‘tour of duty’ did not alter its nondeductible nature. This decision reinforces the principle that commuting expenses are personal, regardless of job-related activities or on-duty status during the commute.

    Facts

    Jon R. Pollei and Harry W. Patrick were police captains in the Salt Lake City Police Department, receiving a monthly car allowance to use their personally owned, specially equipped vehicles for police duties. In 1980, the department implemented a cost-saving measure requiring command officers to provide their own transportation, but continued to equip these vehicles for police use. The officers were required to be in radio contact with headquarters during their commute, which the department considered part of their ‘tour of duty. ‘ The officers claimed deductions for vehicle operating costs, but the IRS disallowed the portion related to commuting between home and headquarters.

    Procedural History

    The IRS determined deficiencies in the officers’ 1981 federal income taxes due to the disallowed commuting expense deductions. The officers petitioned the U. S. Tax Court for a redetermination of these deficiencies. The cases were consolidated for trial, briefing, and opinion, resulting in the Tax Court’s decision in favor of the Commissioner.

    Issue(s)

    1. Whether police officers can deduct the cost of operating an unmarked police vehicle between their residence and police headquarters when they are considered ‘on duty’ during this commute.

    Holding

    1. No, because commuting expenses remain nondeductible personal expenses under IRC sections 162 and 262, regardless of the officers’ ‘on-duty’ status during the commute.

    Court’s Reasoning

    The court applied the well-established rule that commuting expenses are personal and nondeductible, citing Commissioner v. Flowers and other precedents. The court rejected the officers’ argument that their ‘on-duty’ status during the commute transformed it into a deductible business expense. The court noted that the officers’ responsibilities during the commute were no different than during personal use of the vehicle. The court also distinguished this case from others where deductions were allowed for travel between job sites or while away from home, emphasizing that commuting to a single work location remains nondeductible. The court quoted from Moss v. Commissioner, stating that commuting is ‘so inherently personal that it cannot qualify for deductibility, irrespective of its role in the taxpayer’s trade or business. ‘ The court also addressed the officers’ reference to 1984 legislation on fringe benefits, clarifying that the excludability of a fringe benefit does not imply that the related expense would have been deductible.

    Practical Implications

    This decision reinforces the principle that commuting expenses are personal and nondeductible, even in unique circumstances where employees are considered ‘on duty’ during their commute. Legal practitioners should advise clients in similar situations that the nature of their job or employer policies designating them as ‘on duty’ during commuting will not support a deduction claim. This ruling may impact police departments and other employers who consider employees to be on duty during their commute, as they cannot rely on such designations to support employee tax deductions. Subsequent cases, such as McCabe v. Commissioner, have continued to apply this principle, denying deductions for commuting expenses even when the employee is required to be available for work-related calls during the commute.

  • Hamblen v. Commissioner, 78 T.C. 53 (1982): Commuting Expenses for Home Office Workers Are Nondeductible

    Hamblen v. Commissioner, 78 T. C. 53 (1982)

    Commuting expenses between a home office and a principal place of work are nondeductible personal expenses, even if the home office is used for business purposes.

    Summary

    In Hamblen v. Commissioner, a minister sought to deduct automobile expenses incurred while traveling between his home office, where he performed ministerial duties, and his church, his principal place of work. The U. S. Tax Court ruled that these expenses were nondeductible commuting costs under Section 162(a) of the Internal Revenue Code. The court emphasized that the daily travel between a home office and a principal, indefinite work location is considered personal commuting, not a deductible business expense. This decision reaffirmed established tax law and rejected the minister’s claim that denying the deduction violated his First Amendment rights.

    Facts

    Frank R. Hamblen, a minister at Calvary Bible Church in Lima, Ohio, maintained an office in his home where he prepared sermons, conducted telephone work, and performed other ministerial duties. In 1976, Hamblen traveled daily by automobile between his home office and the church, which was 4. 2 miles away and served as his principal place of work. He claimed a deduction of $1,338. 52 for these travel expenses under Section 162(a) of the Internal Revenue Code. The Commissioner of Internal Revenue disallowed the deduction, leading Hamblen to petition the U. S. Tax Court.

    Procedural History

    The Commissioner of Internal Revenue determined a deficiency in Hamblen’s 1976 federal income tax and disallowed the claimed deduction for commuting expenses. Hamblen filed a petition with the U. S. Tax Court, challenging the disallowance. The Tax Court heard the case and ruled in favor of the Commissioner.

    Issue(s)

    1. Whether automobile expenses incurred by a minister traveling between his home office and his principal place of work at the church are deductible under Section 162(a) of the Internal Revenue Code.

    Holding

    1. No, because such transportation costs constitute commuting expenses, which are personal and nondeductible under Section 262 of the Internal Revenue Code.

    Court’s Reasoning

    The U. S. Tax Court applied established tax law principles, citing cases like Steinhort v. Commissioner, which held that commuting expenses between home and a principal place of work are personal and nondeductible. The court rejected Hamblen’s argument that his home office qualified as a separate business location, emphasizing that his church was his principal and indefinite place of work. The court also dismissed Hamblen’s claim that denying the deduction violated his First Amendment rights, noting that the tax law applied equally to all taxpayers and did not discriminate based on religious beliefs. The court’s decision was guided by Section 1. 162-2(e) of the Income Tax Regulations, which explicitly states that commuting expenses are not deductible.

    Practical Implications

    This decision clarifies that commuting expenses between a home office and a principal place of work remain nondeductible, regardless of the business activities conducted at home. Attorneys advising clients with home offices should inform them that only travel expenses between business locations are deductible, not daily commutes from home. This ruling impacts professionals across various fields who work from home, reinforcing the need for clear distinctions between home and work locations for tax purposes. Subsequent cases, such as Curphey v. Commissioner, have continued to uphold this principle, emphasizing the importance of understanding the nature of one’s work locations when claiming deductions.

  • McCabe v. Commissioner, 76 T.C. 876 (1981): When Commuting Expenses Remain Personal Despite Employer Requirements

    McCabe v. Commissioner, 76 T. C. 876 (1981)

    Commuting expenses remain personal and nondeductible even when additional costs are incurred due to an employer’s requirement to carry job-related tools, if those costs are influenced by the employee’s choice of residence.

    Summary

    McCabe, a New York City police officer, sought to deduct the difference between his driving costs and cheaper public transportation options due to a requirement to carry his service revolver, which was prohibited in New Jersey. The Tax Court ruled that these expenses were nondeductible personal costs because they resulted from McCabe’s choice to live in a suburb adjacent to New Jersey, not from the direct pursuit of his employer’s business. The majority opinion held that the necessity to carry a revolver did not transform commuting expenses into deductible business expenses, despite dissenting opinions arguing for an allocation of the excess costs as business-related.

    Facts

    Dennis McCabe, a New York City police officer, lived in Suffern, New York, adjacent to New Jersey. His job required him to carry his service revolver at all times while in New York City. The most direct routes to his workplace passed through New Jersey, where carrying the revolver without a permit was illegal. McCabe chose to drive a longer route entirely through New York, incurring higher commuting costs than if he had used public transportation through New Jersey. He claimed a deduction for the difference between his driving expenses and the cost of public transportation.

    Procedural History

    The Commissioner of Internal Revenue disallowed McCabe’s claimed deduction, leading to a deficiency notice. McCabe petitioned the U. S. Tax Court. The court, after considering the case on a stipulated record, ruled against McCabe’s deduction claim in a majority opinion, with a concurring opinion and two dissenting opinions filed.

    Issue(s)

    1. Whether commuting expenses, increased due to an employer’s requirement to carry a service revolver, are deductible as business expenses when the employee’s chosen residence affects the route of travel?

    Holding

    1. No, because the increased commuting expenses were primarily a result of McCabe’s personal choice of residence, not directly connected to his employer’s business needs.

    Court’s Reasoning

    The court applied the well-established principle that commuting costs between home and work are personal, nondeductible expenses. McCabe’s additional costs arose from his choice to live near New Jersey, not from his employer’s business requirements. The court distinguished this case from situations where additional costs are incurred for transporting job-related tools regardless of residence location. The majority emphasized that the revolver-carrying requirement was only relevant within New York City, and any additional cost due to New Jersey’s laws resulted from McCabe’s personal decision on where to live. A concurring opinion supported this view but disagreed with any suggestion that excess costs due to tool transportation might be deductible under different circumstances. Dissenting opinions argued that McCabe should be allowed to deduct the excess costs over what he would have spent using public transportation, asserting that these costs were directly caused by his employer’s requirement.

    Practical Implications

    This decision reinforces that commuting expenses remain personal unless directly tied to the employer’s business, even when influenced by job requirements like carrying tools. For attorneys, it emphasizes the importance of distinguishing between personal and business expenses based on the necessity and direct connection to business activities. Practitioners should advise clients that choosing a residence that affects commuting routes does not convert personal expenses into deductible business costs. This case may influence future rulings to scrutinize the direct business purpose of claimed deductions, particularly when influenced by personal choices such as residence location. Subsequent cases have continued to apply this principle, with courts maintaining a strict view of what constitutes a business expense for commuting purposes.

  • Zimmerman v. Commissioner, 71 T.C. 367 (1978): When Commuting Expenses to School Are Not Deductible

    Zimmerman v. Commissioner, 71 T. C. 367 (1978)

    Commuting expenses between a taxpayer’s residence and school are nondeductible personal expenses, even if the taxpayer is in a trade or business and attending school to maintain or improve skills.

    Summary

    In Zimmerman v. Commissioner, the Tax Court ruled that Starr Zimmerman, a teacher attending school during unemployment, could not deduct her transportation costs between home and school. The court held these were nondeductible commuting expenses under Section 262(a) of the Internal Revenue Code, despite allowing deductions for her tuition and other educational expenses. The decision underscores that transportation costs to and from a regular place of business, even if that place is a school attended for professional development, are personal and not deductible as business expenses under Section 162(a).

    Facts

    Starr Q. Zimmerman, a professional teacher, was unemployed during 1973 but attended courses at Hunter College in New York City to maintain her teaching skills. She lived in Briarcliff Manor, about 30 miles from the college, and incurred $564 in transportation costs traveling to and from school. On their 1973 tax return, the Zimmermans claimed a deduction for these travel expenses along with other educational costs. The IRS allowed deductions for tuition, fees, and books but disallowed the travel expenses, deeming them personal commuting costs.

    Procedural History

    The Zimmermans filed a petition with the U. S. Tax Court challenging the disallowance of their travel expense deduction. The case was submitted on a stipulated record. The Tax Court, presided over by Judge Tannenwald, ultimately decided in favor of the Commissioner of Internal Revenue.

    Issue(s)

    1. Whether Starr Zimmerman, a teacher attending school during unemployment, can deduct her transportation costs between her residence and school under Section 162(a) of the Internal Revenue Code?

    Holding

    1. No, because the transportation expenses were deemed nondeductible commuting costs under Section 262(a), as they were incurred for personal convenience rather than business necessity.

    Court’s Reasoning

    The court’s decision hinged on the distinction between deductible business expenses and nondeductible personal expenses. It relied on the principle established in Commissioner v. Flowers (326 U. S. 465 (1946)) that transportation expenses must be motivated by business exigencies, not personal convenience, to be deductible under Section 162(a). The court treated Starr as remaining in the teaching profession during her unemployment and attending Hunter College as her principal place of business. Therefore, her travel between home and school was considered commuting, akin to travel to any other workplace, and thus nondeductible under Section 262(a). The court rejected the Zimmermans’ argument that Starr’s home should be considered her tax home, as there was no evidence of business-related activities at her residence. The court also dismissed the relevance of the IRS’s allowance of other educational expenses, noting that such a concession does not extend to all related expenses, particularly those classified as personal under the tax code.

    Practical Implications

    This decision clarifies that unemployed taxpayers attending school to maintain or improve professional skills cannot deduct their daily transportation costs as business expenses. It reinforces the principle that commuting expenses, regardless of the nature of the destination or the distance traveled, are personal and not deductible. Legal practitioners should advise clients in similar situations that only expenses directly related to the maintenance or improvement of professional skills, such as tuition and books, may be deductible, while commuting costs remain nondeductible. This ruling may impact how unemployed professionals pursuing education plan their finances, as they cannot rely on tax deductions to offset transportation costs. Subsequent cases, such as Hitt v. Commissioner (T. C. Memo 1978-66), have distinguished Zimmerman by allowing deductions for travel expenses incurred while away from home overnight, highlighting the narrow scope of the Zimmerman ruling to daily commuting costs.

  • McCallister v. Commissioner, 70 T.C. 513 (1978): Deductibility of Commuting Expenses for Indefinite Employment

    McCallister v. Commissioner, 70 T. C. 513 (1978)

    Commuting expenses to a job site are not deductible under section 162(a) of the Internal Revenue Code if the employment is indefinite rather than temporary.

    Summary

    In McCallister v. Commissioner, the Tax Court ruled that Russell E. McCallister could not deduct his commuting expenses between his home in Culloden, West Virginia, and his job at the Gavin Power Plant in Cheshire, Ohio, for the tax year 1973. McCallister, an electrician, argued these expenses were deductible because his job was temporary. However, the court found his employment was indefinite, lasting over 40 months, and thus the expenses were not deductible under section 162(a). The decision hinged on the temporary-indefinite rule, emphasizing the duration of employment and its expected length at the time of acceptance.

    Facts

    Russell E. McCallister, an electrician, was employed at the Gavin Power Plant in Cheshire, Ohio, from March 13, 1972, to July 16, 1975, except for a brief period. He commuted daily from his home in Culloden, West Virginia, a round trip of 110 miles. McCallister claimed a deduction of $2,979. 36 for these commuting expenses on his 1973 tax return, which the IRS disallowed, asserting the expenses were not ordinary and necessary business expenses. McCallister’s employment was through a union local and with a subcontractor, Delta-Electric and T. F. Jackson, involved in the construction of the power plant, projected to take several years to complete.

    Procedural History

    The IRS determined a deficiency in McCallister’s 1973 income tax, disallowing the claimed commuting expense deduction. McCallister petitioned the Tax Court to contest this determination. The Tax Court heard the case and ultimately ruled in favor of the Commissioner, denying the deduction.

    Issue(s)

    1. Whether under section 162(a) of the Internal Revenue Code, McCallister is entitled to deduct automobile expenses incurred in traveling between his residence and his place of employment each working day.

    Holding

    1. No, because McCallister’s employment at the Gavin Power Plant was not temporary but indefinite, lasting over 40 months, and thus his commuting expenses were not deductible as ordinary and necessary business expenses under section 162(a).

    Court’s Reasoning

    The Tax Court applied the temporary-indefinite rule, which distinguishes between temporary and indefinite employment. Temporary employment is expected to last only for a short period, whereas indefinite employment lasts for a substantial or indeterminate period. The court found that McCallister’s employment was indefinite because it lasted 40 months and was part of a large construction project expected to take several years to complete. The court referenced Commissioner v. Peurifoy, which established that the expected and actual duration of employment are key factors in determining whether employment is temporary. McCallister’s argument that his past jobs were typically short was dismissed as irrelevant to the nature of his current employment. The court emphasized that the employment’s duration at the time of acceptance was critical, and McCallister should have reasonably expected it to last for a substantial period.

    Practical Implications

    This decision clarifies that commuting expenses to a job site are not deductible if the employment is indefinite, impacting how taxpayers and their advisors analyze the deductibility of such expenses. It sets a precedent for distinguishing between temporary and indefinite employment, requiring consideration of the job’s expected and actual duration. Legal practitioners must carefully assess the nature of employment when advising clients on potential deductions. Businesses in industries with long-term projects, such as construction, must be aware that commuting costs for employees on indefinite assignments are not deductible. Subsequent cases have applied this ruling, reinforcing the temporary-indefinite distinction in tax law.

  • Coombs v. Commissioner, 67 T.C. 426 (1976): Taxability of Daily Allowances and Deductibility of Commuting Expenses

    Coombs v. Commissioner, 67 T. C. 426 (1976)

    Daily allowances for remote work locations are taxable income, and commuting expenses between home and work are not deductible.

    Summary

    In Coombs v. Commissioner, the U. S. Tax Court ruled on whether daily allowances paid to employees at the remote Nevada Test Site were taxable income and whether commuting expenses between Las Vegas and the test site were deductible. The court found that the allowances, provided to both federal and private contractor employees, were taxable under section 61(a) of the Internal Revenue Code and not excludable under section 119. Additionally, the court determined that the long-distance commuting expenses were nondeductible personal expenses under section 262, despite the remote location and lack of nearby housing, as they did not qualify as business expenses under section 162(a)(2).

    Facts

    Employees at the Nevada Test Site, located 65 to 135 miles north of Las Vegas, received daily allowances in addition to their regular salaries. Federal employees received $5 per day at Camp Mercury and $7. 50 at forward areas, while private contractors received similar amounts plus additional travel pay based on union agreements. Employees typically commuted daily from Las Vegas, with some traveling up to 200 miles round trip. The allowances were reported as income on W-2 forms, and employees sought to deduct their commuting expenses and the allowances as business expenses.

    Procedural History

    The Commissioner of Internal Revenue disallowed the deductions claimed by the petitioners for their commuting expenses and the daily allowances. The petitioners then brought their case to the U. S. Tax Court, where the cases were consolidated due to common issues of law and fact.

    Issue(s)

    1. Whether the daily allowances paid to employees at the Nevada Test Site are includable in gross income under section 61(a) or excludable under section 119 of the Internal Revenue Code?
    2. Whether the expenses incurred by employees in commuting between their homes in the Las Vegas area and the Nevada Test Site are deductible as business expenses under section 162?

    Holding

    1. Yes, because the allowances were compensatory and not specifically for reimbursement of meals and lodging, making them includable in gross income under section 61(a) and not excludable under section 119.
    2. No, because the commuting expenses were personal and not incurred away from the taxpayer’s “tax home” or in pursuit of a trade or business, thus nondeductible under section 262 and not qualifying under section 162(a)(2).

    Court’s Reasoning

    The court applied the broad definition of gross income under section 61(a), finding that the allowances were gains to the employees and thus taxable unless excluded by another section. The court rejected the application of section 119, which excludes the value of meals or lodging furnished for the convenience of the employer, because the allowances were not specifically for meals or lodging and were not required for the employees’ duties. The court also held that the commuting expenses were personal under section 262, as they were not incurred “while away from home” or “in the pursuit of a trade or business” under section 162(a)(2). The court emphasized that the location of the test site did not change the nature of the expenses from personal to business.

    Practical Implications

    This decision clarifies that daily allowances provided to employees for remote work locations are taxable income, impacting how such payments are treated by employers and employees. It also reinforces that commuting expenses, regardless of distance, are not deductible, affecting employees in similar situations across industries. Employers should clearly classify allowances as income, and employees must understand that commuting costs are personal expenses. Subsequent cases and IRS guidance have followed this ruling, and it remains a key precedent for tax treatment of allowances and commuting expenses.

  • Norwood v. Commissioner, 66 T.C. 467 (1976): Distinguishing Temporary from Indefinite Employment for Commuting Expense Deductions

    Norwood v. Commissioner, 66 T.C. 467 (1976)

    For the purpose of deducting daily commuting expenses to a job site, employment is considered temporary if its termination can be foreseen within a reasonably short period of time; conversely, employment is indefinite if it is realistically expected to last for a substantial or indeterminate duration.

    Summary

    Lawrence Norwood, a steamfitter, lived near Washington, D.C. and was dispatched by his union to a job site in Lusby, Maryland due to a local work shortage. He drove daily from his home to Lusby. His initial assignment was expected to last six months, but he received subsequent assignments at the same location, extending his employment beyond two years. The Tax Court addressed whether Norwood’s daily commuting expenses to Lusby were deductible as business expenses. The court held that his initial assignment was temporary, allowing deduction of commuting expenses for that period, but his subsequent continued employment transformed the job to indefinite, thus disallowing deductions for the later period.

    Facts

    Lawrence Norwood, a steamfitter and member of a Washington, D.C. union since 1964, was sent to a job site in Lusby, Maryland in October 1971 due to a work shortage in D.C.
    His first assignment at the Calvert Cliffs Atomic Energy Plant in Lusby was expected to last about six months.
    Instead of being laid off after his initial assignment, Norwood was asked to stay on as a foreman, a role expected to last nine months.
    He continued to receive subsequent assignments at the same Lusby site, working as an instrument fitter, welder, and union shop steward until December 1974, when he was injured.
    Throughout this period, Norwood maintained his family home in Adelphi, Maryland, and commuted daily to Lusby, receiving a standard travel allowance from his employer.
    He deducted automobile expenses for commuting in 1972 and 1973.

    Procedural History

    The Commissioner of Internal Revenue determined deficiencies in Norwood’s federal income taxes for 1972 and 1973, disallowing the deduction of daily commuting expenses.
    Norwood petitioned the Tax Court to contest the Commissioner’s determination.

    Issue(s)

    1. Whether Lawrence Norwood’s employment in Lusby, Maryland was “temporary” or “indefinite” for the purpose of determining the deductibility of daily commuting expenses under Section 162(a) of the Internal Revenue Code.

    Holding

    1. Yes, in part and No, in part. The Tax Court held that Norwood’s employment in Lusby was temporary during his initial assignment (October 1971 to March 1972), because at its inception, it was expected to last only a short period. However, it became indefinite after he accepted the foreman position in March 1972, because at that point, his continued employment for a substantial period became reasonably foreseeable.

    Court’s Reasoning

    The court relied on the established distinction between “temporary” and “indefinite” employment to determine the deductibility of commuting expenses. The court stated, “Where employment is temporary, some otherwise personal expenses connected with such employment may be considered to arise from the exigencies of business and not from the taxpayer’s personal choice to live at a distance from his work.” Citing Truman C. Tucker, 55 T.C. 783, 786 (1971), the court defined temporary employment as that which “can be expected to last for only a short period of time.”

    The court found Norwood’s initial assignment to be temporary because it was expected to last only six months. However, the court emphasized that “[e]ven if it is known that a particular job may or will terminate at some future date, that job is not temporary if it is expected to last for a substantial or indefinite period of time.” Citing Ford v. Commissioner, 227 F.2d 297 (4th Cir. 1955).

    The court reasoned that when Norwood accepted the foreman position, his expectation of employment changed. At that point, he could reasonably expect continued employment for a substantial period on the large Calvert Cliffs project. The court noted, “This substantial actual duration is an additional persuasive reason for concluding that petitioner’s employment with Bechtel was ‘indeterminate in fact as it [developed],’… without regard to the fact that it consisted of a series of shorter assignments.” Citing Commissioner v. Peurifoy, 254 F.2d 483, 486 (4th Cir. 1957).

    The court concluded that while the initial commute was deductible due to the temporary nature of the first job, the subsequent commuting expenses were not deductible because the employment became indefinite after Norwood accepted the foreman position.

    Practical Implications

    Norwood v. Commissioner clarifies the distinction between temporary and indefinite employment in the context of commuting expense deductions. It highlights that the determination of whether employment is temporary or indefinite is not solely based on the taxpayer’s subjective expectations or the initial anticipated duration of a job. Instead, courts will objectively assess the circumstances at the point in time when the nature of employment is being evaluated.

    This case emphasizes that initially temporary employment can evolve into indefinite employment due to changed circumstances, such as accepting subsequent assignments or extensions at the same location. Taxpayers and practitioners must consider the realistic expectation of continued employment at a location, not just the initial job duration, when determining the deductibility of commuting expenses. The case serves as a reminder that prolonged employment at a single location, even through a series of short-term assignments, can be deemed indefinite for tax purposes, thus disallowing commuting expense deductions.

  • Norwood v. Commissioner, 66 T.C. 489 (1976): Deductibility of Commuting Expenses Based on Temporary vs. Indefinite Employment

    Norwood v. Commissioner, 66 T. C. 489 (1976)

    Commuting expenses are deductible if the employment is temporary, but not if it becomes indefinite or permanent.

    Summary

    In Norwood v. Commissioner, the Tax Court ruled on whether Lawrence Norwood could deduct his daily commuting expenses from his home in Adelphi, Md. , to his work at the Calvert Cliffs Atomic Energy Plant in Lusby, Md. Norwood, a steamfitter, was initially sent to Lusby for what he believed would be a temporary six-month job. However, his employment extended beyond three years due to subsequent assignments. The court held that commuting expenses were deductible only until March 1972, when his initial temporary assignment ended, after which his continued employment at the site was deemed indefinite, rendering subsequent commuting expenses non-deductible.

    Facts

    Lawrence Norwood, a steamfitter and member of a Washington, D. C. , union, was sent to work at the Calvert Cliffs Atomic Energy Plant in Lusby, Md. , in October 1971 due to a local work shortage. He expected this assignment to last about six months. Norwood drove daily from his home in Adelphi, Md. , to Lusby, as there was no convenient public transportation. In March 1972, instead of being laid off, he was promoted to foreman for a new phase of the project, expected to last nine months. He continued at the site through various roles until an injury in December 1974, totaling over three years of employment at Lusby.

    Procedural History

    The IRS determined deficiencies in Norwood’s 1972 and 1973 federal income taxes, disallowing deductions for his commuting expenses. Norwood petitioned the Tax Court for a redetermination of these deficiencies. The court heard the case and issued its decision in 1976.

    Issue(s)

    1. Whether Norwood’s employment at the Calvert Cliffs Atomic Energy Plant was temporary or indefinite for the purpose of deducting commuting expenses under Section 162(a) of the Internal Revenue Code.

    Holding

    1. Yes, until March 1972, because Norwood’s initial employment at Lusby was temporary and expected to last only six months. No, after March 1972, because his continued employment became indefinite, as evidenced by his promotion and subsequent assignments at the same site.

    Court’s Reasoning

    The court applied the legal principle that commuting expenses are deductible if employment is temporary, defined as lasting a short period of time. Norwood’s initial six-month assignment qualified as temporary, allowing deductions until March 1972. However, his promotion and subsequent roles at the same site transformed his employment into an indefinite status, which is not deductible. The court considered the overall duration of employment, the nature of successive assignments, and Norwood’s reasonable expectations of continued work at Lusby. The decision was influenced by the policy of distinguishing between temporary and indefinite employment, as established in Peurifoy v. Commissioner. The court noted, “Employment which is originally temporary may become indefinite due to changed circumstances, or simply by the passage of time. “

    Practical Implications

    Norwood v. Commissioner clarifies the criteria for deducting commuting expenses, emphasizing the distinction between temporary and indefinite employment. Practitioners should carefully assess the expected duration of employment when advising clients on potential deductions. The case impacts how workers in industries with project-based or temporary assignments approach tax planning. Businesses may need to provide clearer expectations about the duration of work assignments to assist employees with tax compliance. Subsequent cases, such as Turner v. Commissioner, have further refined these principles, but Norwood remains a key reference for understanding the temporary vs. indefinite employment distinction in the context of commuting expense deductions.

  • Feistman v. Commissioner, 63 T.C. 129 (1974): Taxability of Mandatory Retirement Contributions

    Feistman v. Commissioner, 63 T. C. 129 (1974)

    Mandatory contributions to retirement plans are includable in gross income even when required as a condition of employment.

    Summary

    Eugene and Lorraine Feistman, employees of Los Angeles County and the Los Angeles City School District, challenged the inclusion of their mandatory retirement contributions in their gross income. The Tax Court ruled that these contributions were taxable, following established precedent. The court also upheld the disallowance of deductions for educational and commuting expenses, emphasizing the personal nature of these expenditures. The decision reinforces the principle that mandatory retirement contributions are part of taxable income and highlights the non-deductibility of personal expenses like education and commuting.

    Facts

    Eugene Feistman was a deputy probation officer for Los Angeles County, and Lorraine Feistman was a teacher for the Los Angeles City School District. Both were required by law to participate in their respective retirement systems, with contributions withheld from their salaries. Eugene pursued a law degree and sought to deduct educational expenses, while both claimed deductions for their children’s education and commuting costs. The Commissioner disallowed these deductions and included the retirement contributions in their gross income.

    Procedural History

    The Feistmans filed a petition with the United States Tax Court after the Commissioner determined deficiencies in their income tax for the years 1968 through 1971. The court heard the case and issued a decision that upheld the Commissioner’s determination on all issues.

    Issue(s)

    1. Whether amounts withheld from the petitioners’ salaries and contributed to their respective retirement funds are excludable from their gross income.
    2. Whether the petitioners’ educational expenses are deductible.
    3. Whether the petitioners’ commuting expenses are deductible.

    Holding

    1. No, because the court followed established precedent that mandatory retirement contributions are includable in gross income.
    2. No, because the educational expenses were personal and nondeductible under the applicable tax regulations.
    3. No, because commuting expenses are considered personal and nondeductible under established tax law.

    Court’s Reasoning

    The court relied heavily on stare decisis, citing long-standing rulings and judicial decisions that mandatory contributions to retirement plans are part of gross income. The court noted that the retirement systems in question were similar to those of federal employees, which had been consistently treated as taxable income. The court also applied the principle that personal expenses, such as education and commuting, are not deductible. Specifically, Eugene’s law school expenses were deemed to qualify him for a new trade or business, making them nondeductible under IRS regulations. The court rejected the argument that commuting expenses were deductible, even though Eugene was required to have a car available at work, because he would have driven regardless due to inadequate public transportation.

    Practical Implications

    This decision solidifies the rule that mandatory retirement contributions are taxable income, affecting how employees and employers must report and withhold taxes. Legal practitioners should advise clients that such contributions cannot be excluded from income, even if required by law. The ruling also serves as a reminder that educational and commuting expenses are generally personal and nondeductible, impacting tax planning strategies. Subsequent cases have continued to apply these principles, reinforcing their importance in tax law. Attorneys should consider these implications when advising clients on the tax treatment of mandatory retirement contributions and the deductibility of personal expenses.

  • Anderson v. Commissioner, 60 T.C. 834 (1973): Commuting Expenses Not Deductible Despite Union Hall Requirement

    Anderson v. Commissioner, 60 T. C. 834 (1973)

    Commuting expenses remain nondeductible even when a union requires employees to report to a union hall before work.

    Summary

    In Anderson v. Commissioner, the U. S. Tax Court ruled that Elsie Anderson could not deduct her transportation costs from a union hall to her work locations as business expenses. Anderson, a banquet waitress, had to visit her union’s hall daily to receive her work assignment. Despite this requirement, the court held that her travel to and from work was still considered commuting, which is traditionally nondeductible under Section 162(a) of the Internal Revenue Code. The decision emphasizes that commuting expenses are personal, not business-related, even when influenced by union rules, reinforcing the established tax principle of non-deductibility for commuting costs.

    Facts

    Elsie Anderson worked as a banquet waitress in Boston, Massachusetts. She was required by her union, Local 34 of the Bartenders and Dining Room Employees Union, to report to the union hall to receive her daily work assignment. After receiving her assignment, she drove from the union hall to her work location and parked there. In 1969, Anderson incurred $195 in driving costs from the union hall to her places of employment and $390 in parking fees. She claimed these expenses as business deductions on her tax return, which the Commissioner of Internal Revenue disallowed.

    Procedural History

    The Andersons filed a petition with the U. S. Tax Court to contest the Commissioner’s determination of a $219. 56 deficiency in their 1969 federal income tax, based on the disallowed deduction of Anderson’s commuting expenses. The Tax Court reviewed the case and issued its decision on September 5, 1973.

    Issue(s)

    1. Whether the costs incurred by Elsie Anderson in driving from the union hall to her places of employment and parking at work are deductible under Section 162(a) of the Internal Revenue Code as ordinary and necessary business expenses.

    Holding

    1. No, because the costs were considered nondeductible commuting expenses, even though Anderson had to report to the union hall first.

    Court’s Reasoning

    The court applied the longstanding rule that commuting expenses are not deductible under Section 162(a), as commuting is considered a personal expense influenced by one’s choice of residence. The court cited cases such as United States v. Tauferner and Steinhort v. Commissioner to reinforce this principle. It rejected Anderson’s argument that the union hall served as an office, stating that she merely picked up her assignment there without performing work-related tasks. The court emphasized that the requirement to visit the union hall was imposed by the union, not her employers, and did not constitute a business trip. The decision upheld the non-deductibility of commuting expenses to maintain uniform tax treatment across taxpayers.

    Practical Implications

    This ruling reaffirms that commuting expenses are not deductible, even when influenced by union rules or other external requirements. Legal practitioners should advise clients that travel to and from work remains a personal expense, regardless of intermediate stops mandated by third parties. This decision has implications for unions and employees, as it may influence how unions structure their assignment processes and how employees plan their tax deductions. Subsequent cases continue to reference Anderson when addressing commuting expense deductions, maintaining its significance in tax law.