SCOTUS Reports

Tag: indefinite employment

  • Mitchell v. Commissioner, 73 T.C. 225 (1979): Defining ‘Tax Home’ for Travel Expense Deductions

    Mitchell v. Commissioner, 73 T. C. 225 (1979)

    A taxpayer’s ‘tax home’ for travel expense deductions is the vicinity of their principal place of employment, unless the employment is temporary.

    Summary

    In Mitchell v. Commissioner, the Tax Court ruled that Ted Mitchell’s tax home was near Napa State Hospital, his principal place of employment, rather than his family residence in Ukiah. Mitchell, who worked at Napa after transferring from Mendocino State Hospital, sought to deduct his travel expenses between Ukiah and Napa. The court held that his employment at Napa was indefinite, not temporary, thus his tax home was Napa, and his travel expenses were non-deductible personal expenses. This case clarifies the ‘tax home’ concept for travel deductions under section 162(a)(2), emphasizing the importance of employment duration in determining tax home location.

    Facts

    Ted Mitchell worked as a psychiatric technician at Mendocino State Hospital in Ukiah until 1972, when he transferred to Napa State Hospital due to the closure of Mendocino. He continued working at Napa until his retirement in 1977. During his employment at Napa, Mitchell maintained his family home in Ukiah, where his wife Jan resided. Mitchell lived in a rented trailer in Napa during the workweek and returned to Ukiah on weekends. He claimed deductions for travel expenses between Napa and Ukiah for 1975 and 1976, asserting that Ukiah was his tax home.

    Procedural History

    The IRS determined deficiencies in Mitchell’s federal income tax for 1975 and 1976, disallowing his claimed travel expense deductions. Mitchell petitioned the Tax Court, which consolidated the cases for trial and opinion. The court ultimately ruled in favor of the Commissioner, holding that Mitchell’s tax home was at Napa, not Ukiah.

    Issue(s)

    1. Whether Ted Mitchell’s tax home for the purpose of deducting travel expenses under section 162(a)(2) was in Ukiah or near Napa State Hospital.

    Holding

    1. No, because Mitchell’s employment at Napa State Hospital was indefinite, not temporary, making the vicinity of Napa his tax home for tax purposes.

    Court’s Reasoning

    The Tax Court applied the general rule that a taxpayer’s ‘tax home’ is the vicinity of their principal place of employment, as established in cases like Daly v. Commissioner and Foote v. Commissioner. The court rejected Mitchell’s argument that his tax home was Ukiah, his family residence, citing the ‘temporary’ employment exception from Peurifoy v. Commissioner. The court found that Mitchell’s employment at Napa was indefinite because its termination could not have been foreseen within a short period. The court also considered the Ninth Circuit’s approach in cases like Coombs v. Commissioner and Harvey v. Commissioner, concluding that Mitchell’s employment at Napa was for a long period, thus shifting his tax home to Napa. The court emphasized that Mitchell’s decision to maintain a home in Ukiah was a personal choice, and his travel expenses between Napa and Ukiah were non-deductible personal expenses.

    Practical Implications

    This decision has significant implications for taxpayers claiming travel expense deductions under section 162(a)(2). It clarifies that the tax home is generally the principal place of employment unless the employment is temporary. Taxpayers must carefully consider the duration of their employment at a new location when determining their tax home. The ruling impacts how tax professionals advise clients on travel deductions, particularly for those who maintain a family residence away from their primary work location. Subsequent cases, such as Coombs v. Commissioner, have applied this principle, reinforcing the need for taxpayers to assess the permanency of their employment when claiming travel expenses. This case also underscores the importance of maintaining clear records and understanding the IRS’s criteria for temporary versus indefinite employment.

  • 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.

  • 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.

  • 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.

  • Blatnick v. Commissioner, 56 T.C. 1344 (1971): Deductibility of Travel Expenses for Indefinite Employment

    Blatnick v. Commissioner, 56 T. C. 1344 (1971)

    Travel expenses are not deductible when employment is indefinite rather than temporary, even if the job site changes.

    Summary

    Edward Blatnick, a heavy equipment operator, worked on the Blanco Tunnel project for over three years, with periodic layoffs, and claimed travel expenses for 1967. The IRS denied these deductions, arguing his employment was indefinite. The Tax Court agreed, ruling that Blatnick’s job was not temporary because it could reasonably be expected to continue indefinitely. The court emphasized that brief layoffs and geographical shifts within the same project did not make the employment temporary. This decision clarifies that for travel expenses to be deductible, the employment must be truly temporary, not merely subject to periodic interruptions.

    Facts

    Edward Blatnick, a heavy equipment operator, was employed by Colorado Constructors, Inc. , on the Blanco Tunnel project starting in July 1965. He experienced several layoffs, each lasting a few weeks, but was consistently recalled to the same project. Blatnick maintained an apartment near the job site and made biweekly trips to his home in Durango, Colorado, where his wife resided. In 1967, Blatnick claimed deductions for travel expenses, including apartment rent, meals, and mileage between his apartment, the job site, and his home.

    Procedural History

    The Commissioner of Internal Revenue issued a notice of deficiency for Blatnick’s 1967 tax return, disallowing the claimed travel expense deductions. Blatnick and his wife petitioned the U. S. Tax Court for a redetermination of the deficiency. The court heard the case and issued its opinion on September 22, 1971, upholding the Commissioner’s determination.

    Issue(s)

    1. Whether Blatnick’s employment at the Blanco Tunnel project was temporary or indefinite for the purpose of deducting travel expenses under Section 162(a)(2) of the Internal Revenue Code.

    Holding

    1. No, because Blatnick’s employment at the Blanco Tunnel was indefinite rather than temporary, as it could reasonably be expected to continue over a long period with only brief interruptions.

    Court’s Reasoning

    The court applied the principle that travel expenses are deductible only if the employment is temporary, defined as employment where termination within a short period could be foreseen. The court found Blatnick’s employment at the Blanco Tunnel to be indefinite because it lasted over three years with only brief layoffs due to weather conditions. The court noted that Blatnick’s continuous maintenance of an apartment near the job site indicated an expectation of long-term employment. The court also distinguished between temporary and indefinite employment by citing previous cases, emphasizing that brief interruptions and geographical shifts within the same project do not make employment temporary. The court quoted from Commissioner v. Peurifoy to highlight the transient yet potentially long-lasting nature of heavy construction work. The court concluded that Blatnick’s principal place of employment was near the Blanco Tunnel, making his travel expenses nondeductible.

    Practical Implications

    This decision impacts how taxpayers in the construction industry and other fields with similar employment patterns should approach travel expense deductions. It underscores the need to distinguish between temporary and indefinite employment, with only the former qualifying for deductions. Legal practitioners must carefully analyze the nature of employment, considering factors like job duration, layoffs, and the taxpayer’s expectations. This ruling may affect how businesses structure employment arrangements to comply with tax regulations. Subsequent cases, such as Rev. Rul. 93-86, have further clarified the distinction between temporary and indefinite employment, reinforcing the principles established in Blatnick.

  • Owens v. Commissioner, T.C. Memo. 1969-289: Defining ‘Tax Home’ and ‘Indefinite’ Employment for Travel Expense Deductions

    Owens v. Commissioner, T.C. Memo. 1969-289 (1969)

    For the purpose of deducting travel expenses while ‘away from home’ under Section 162(a)(2) of the Internal Revenue Code, a taxpayer’s ‘home’ is their principal place of business or employment, and assignments of indefinite duration at a different location do not qualify as ‘away from home’.

    Summary

    The taxpayer, Owens, resided with his family in Oskaloosa, Iowa. He worked for the Iowa State Highway Commission and was assigned to a highway construction project in Des Moines, approximately 60 miles from Oskaloosa. Owens rented rooms in Des Moines during the work week and returned to Oskaloosa on weekends. He sought to deduct meal, lodging, and automobile expenses as ‘traveling expenses while away from home’. The Tax Court disallowed these deductions, holding that Des Moines was Owens’s ‘tax home’ because it was his principal place of employment and his assignment there was indefinite, not temporary. The court emphasized that ‘home’ for tax purposes means the principal place of business, not necessarily the taxpayer’s personal residence.

    Facts

    Owens and his wife resided in Oskaloosa, Iowa since 1941.

    Owens began working for the Iowa State Highway Commission in 1959 and was informed that he could be transferred anywhere in Iowa as a condition of employment.

    In April 1960, Owens was assigned to the Des Moines construction office for the Des Moines Freeway Project.

    His supervisor considered the Des Moines assignment permanent.

    Owens became aware that his inspection tasks on the Freeway Project would continue for several years, at least into 1966.

    From 1963, Owens rented rooms in Des Moines during the week, returning to his family in Oskaloosa on weekends.

    For 1964 and 1965, Owens claimed deductions for meals and lodging in Des Moines and car expenses for weekend travel to Oskaloosa.

    The IRS disallowed these deductions.

    Procedural History

    The Commissioner of Internal Revenue determined deficiencies in Owens’s income tax for 1964 and 1965 due to disallowed deductions for travel expenses.

    Owens petitioned the Tax Court for a redetermination of these deficiencies.

    Issue(s)

    1. Whether Des Moines was Owens’s ‘home’ for the purposes of Section 162(a)(2) of the Internal Revenue Code, which allows deductions for ‘traveling expenses…while away from home in the pursuit of a trade or business’.

    2. Whether Owens’s employment in Des Moines was ‘temporary’ or ‘indefinite’.

    Holding

    1. No, Des Moines was Owens’s ‘tax home’ because it was his principal place of employment.

    2. Owens’s employment in Des Moines was ‘indefinite’ because it was expected to last for a substantial and indeterminate period.

    Court’s Reasoning

    The court stated that for tax purposes, ‘home’ generally refers to the taxpayer’s principal place of business, employment, or post of duty, citing Floyd Garlock, 34 T.C. 611, 614 (1960) and Ronald D. Kroll, 49 T.C. 557 (1968).

    The court referenced Commissioner v. Stidger, 386 U.S. 287 (1967), where the Supreme Court held that a military taxpayer’s ‘tax home’ is their permanent duty station, reinforcing the concept that ‘home’ is tied to the place of employment.

    The court found that Des Moines and Marquisville were Owens’s principal places of employment during the years in question, as he performed all his duties there.

    The court distinguished between ‘temporary’ and ‘indefinite’ employment. It cited Peurifoy v. Commissioner, 358 U.S. 59, 60 (1958) and Ronald D. Kroll, 49 T.C. 557, 562, noting that deductions are allowed for temporary work away from a principal place of employment, but not for indefinite assignments.

    The court reasoned that Owens’s assignment in Des Moines, while potentially subject to transfer, was in fact indefinite because he expected to remain there for several years to complete his tasks on the Freeway Project. His situation was compared to Floyd Garlock and Beatrice H. Albert, 13 T.C. 129 (1949), where similar deductions were disallowed for taxpayers working at locations considered their indefinite principal place of employment, despite maintaining residences elsewhere.

    The court rejected Owens’s argument that the possibility of transfer made his assignment temporary, stating that routine possibility of transfer does not make indefinite employment temporary.

    Practical Implications

    Owens v. Commissioner provides a clear illustration of the ‘tax home’ doctrine in the context of travel expense deductions. It reinforces that for tax purposes, ‘home’ is primarily defined by the location of one’s principal place of business or employment, not personal residence.

    The case highlights the critical distinction between ‘temporary’ and ‘indefinite’ employment assignments. Taxpayers accepting work in a new location must assess the expected duration of the assignment. If the assignment is expected to last for a substantial or indeterminate period, the new work location is likely to be considered their ‘tax home’, and expenses for travel, meals, and lodging there will not be deductible as ‘away from home’.

    Legal practitioners should advise clients whose work requires them to relocate to consider the expected duration of the assignment and the location of their principal place of business when evaluating the deductibility of travel expenses. This case, along with Garlock and Albert, sets a precedent against deducting living expenses in locations of indefinite work assignments, even if the taxpayer maintains a family residence elsewhere.

    Subsequent cases and IRS guidance continue to apply the principles established in Owens, emphasizing the objective determination of the principal place of business and the indefinite vs. temporary nature of employment to determine ‘tax home’ for travel expense deductions.

  • Peurifoy v. Commissioner, T.C. Memo. 1958-6: Distinguishing Temporary from Indefinite Employment for Travel Expense Deductions

    Peurifoy v. Commissioner, T.C. Memo. 1958-6

    For purposes of deducting travel expenses while ‘away from home’ under Internal Revenue Code Section 162(a)(2), employment expected to last for a substantial or indefinite period is not considered ‘temporary’, even if the taxpayer maintains a residence elsewhere.

    Summary

    The Tax Court disallowed a boilermaker’s deductions for living expenses in Rome, Georgia, where he worked for nearly two years, finding his employment ‘indefinite’ rather than ‘temporary.’ Peurifoy argued his job was temporary because his union could have reassigned him. The court distinguished this case from prior rulings where employments were clearly temporary and held that employment expected to last for a considerable or indefinite period at a specific location constitutes the taxpayer’s ‘home’ for tax purposes, thus precluding deductions for living expenses at that location.

    Facts

    Petitioner, a boilermaker, worked on several temporary jobs away from home in early 1953. He then accepted employment with Babcock & Wilcox in Rome, Georgia, to install boilers for Georgia Power Company. This was the largest job he had ever undertaken, and he anticipated it would last one to two years. He worked in Rome from April 27, 1953, to April 22, 1955, with two brief strike-related interruptions. He deducted $5 per day for meals and lodging in Rome, which the Commissioner disallowed, arguing Rome was his ‘post of duty’.

    Procedural History

    The Commissioner of Internal Revenue disallowed a portion of Peurifoy’s claimed deductions for ‘Board & Lodging away from home.’ Peurifoy petitioned the Tax Court to contest the deficiency determination.

    Issue(s)

    1. Whether the petitioner’s employment in Rome, Georgia, with Babcock & Wilcox was ‘temporary’ within the meaning of Internal Revenue Code Section 162(a)(2), allowing him to deduct expenses for meals and lodging while ‘away from home’.

    Holding

    1. No, because the petitioner’s employment in Rome was ‘indefinite’ in duration, not ‘temporary’, despite the possibility of union reassignment.

    Court’s Reasoning

    The court distinguished this case from Schurer and Leach, where employments were clearly temporary with taxpayers returning home between short-term jobs. Here, Peurifoy’s Rome job lasted nearly two years and was expected to be of considerable duration. The court emphasized the difference between ‘indefinite’ and ‘temporary’ employment, citing Beatrice H. Albert, which denied deductions for ‘indefinite’ employment, even without permanence. The court stated, “The employment * * * lacked permanence, but, on the other hand, was indefinite in duration rather than obviously temporary, in that it was not the sort of employment in which termination within a short period could be foreseen…” While Peurifoy argued union reassignment made his job temporary, the court noted the union did not reassign him, and he worked in Rome for a substantial period. The court concluded, “Under these facts, we do not think petitioner’s employment at the Rome, Georgia, job in 1953 and 1954 can be characterized as ‘temporary’.”

    Practical Implications

    Peurifoy clarifies the distinction between ‘temporary’ and ‘indefinite’ employment for travel expense deductions. Taxpayers accepting employment at a specific location expected to last a substantial or indefinite period, even if not permanent, will likely be considered to have established their ‘tax home’ there. This case highlights that the anticipated duration of employment at a location, not just the existence of a permanent residence elsewhere or the possibility of job termination, is crucial in determining deductibility of living expenses under Section 162(a)(2). Later cases applying Peurifoy often focus on the expected or actual duration of the employment to determine if it qualifies as ‘temporary’ for tax deduction purposes.

  • Cunningham v. Commissioner, 22 T.C. 906 (1954): Deductibility of Travel Expenses While Stationed at a Permanent Workplace

    22 T.C. 906 (1954)

    Expenses for food and lodging are not deductible as traveling expenses when an individual is employed in a location for an indefinite duration; that location becomes the individual’s “home” for tax purposes.

    Summary

    The United States Tax Court addressed whether an employee stationed in Tokyo, Japan, could deduct expenses for food, lodging, and other costs as business expenses. Allan Cunningham, a civilian employee, sought to deduct these expenses, arguing they were incurred while away from home in pursuit of a trade or business. The court held that Tokyo was Cunningham’s tax home because his employment there was of indefinite duration. Therefore, his expenses were not deductible traveling expenses. The court also addressed the deductibility of expenses related to Cunningham’s attempts at trading, concluding these activities did not constitute a trade or business. Finally, the court addressed the deductibility of the cost of maintaining an apartment in Washington, D.C. It ruled that these expenses did not qualify as deductible business expenses.

    Facts

    Allan Cunningham, a civilian employee of the United States Army, was stationed in Tokyo, Japan, throughout 1948. He was not reimbursed for his expenses in Japan, though his travel expenses to and from Japan were government-funded. Cunningham and his wife made purchases of various articles in Japan with the intent to sell some at a profit. He spent some time investigating opportunities for profitable trade. Cunningham also maintained an apartment in Washington, D.C., for which he paid rent, utilities, and telephone charges. Cunningham claimed a dependency credit for his mother and sought to deduct various expenses as trade or business expenses in his 1948 tax return.

    Procedural History

    The Commissioner of Internal Revenue determined a deficiency in the Cunninghams’ income tax for 1948, disallowing the dependency credit and the claimed business expense deductions. The Cunninghams challenged this determination in the United States Tax Court.

    Issue(s)

    1. Whether Allan Cunningham provided more than one-half of his mother’s support, entitling him to a dependency credit.

    2. Whether the Cunninghams could deduct expenses for food, lodging, and other costs incurred in Japan as trade or business expenses under Section 23(a)(1)(A) of the Internal Revenue Code.

    3. Whether the expenses of maintaining an apartment in Washington, D.C., are deductible as a business expense.

    Holding

    1. No, because Cunningham failed to prove that he provided more than half of his mother’s support.

    2. No, because Cunningham’s post of duty in Tokyo was his “home” for tax purposes, and his activities did not qualify as the carrying on of a trade or business.

    3. No, because these expenses were not proven to be business-related.

    Court’s Reasoning

    The court first addressed the dependency credit, finding that Cunningham failed to substantiate that he provided over half of his mother’s support. The court noted that his testimony regarding the additional amounts paid to his mother was vague and uncorroborated and that the total cost of the mother’s support was not shown. Addressing the business expense deductions, the court found that Cunningham’s employment in Tokyo was of indefinite duration, making Tokyo his tax home. The court cited the rule that expenses for meals and lodging are not deductible when an employee’s post of duty is considered their home. The court further held that the Cunninghams were not engaged in a trade or business in Japan. They were merely attempting to profit from their purchases. The court contrasted the activities of the taxpayers with those of a dealer or a person engaged in a trade or business. The court ultimately concluded that the expenses in Washington, D.C. were not shown to be business-related.

    Practical Implications

    This case underscores the importance of establishing the permanence of a work location when determining the deductibility of travel expenses. The court clarified that an indefinite employment period results in the employee’s work location becoming their tax home, making expenses for food and lodging non-deductible. Attorneys should advise clients to maintain meticulous records and be prepared to demonstrate the temporary nature of their employment if claiming deductions for travel expenses. This ruling helps define “home” for tax purposes and has important implications for employees stationed overseas or in other long-term assignments. This case also highlights the high threshold for proving a “trade or business” beyond regular employment, impacting the tax treatment of side ventures or investment activities. Later cases follow this precedent, denying deductions for expenses incurred in locations deemed the taxpayer’s tax home.

  • Carroll v. Commissioner, 20 T.C. 382 (1953): Determining “Home” for Travel Expense Deductions

    20 T.C. 382 (1953)

    For tax deduction purposes, a taxpayer’s “home” is generally their principal place of employment, not necessarily their family residence, especially when employment is indefinite rather than temporary.

    Summary

    Michael Carroll, a civilian employee of the War Department, sought to deduct expenses for meals and lodging incurred while working in South Korea as a banking and taxation consultant. The Tax Court denied the deduction, holding that Carroll’s “home” for tax purposes was his principal place of employment in Korea, not his family residence in the United States. Consequently, his expenses were not considered “away from home” and were not deductible under Section 23(a)(1)(A) of the Internal Revenue Code. The court also rejected his alternative argument for deduction under Section 23(a)(2), deeming the expenses personal and not directly related to income production.

    Facts

    Carroll maintained a home in Edgewater, Maryland, but rented it out while he was in Korea. His wife and son resided in Elyria, Ohio. He entered into an employment agreement with the War Department for an indefinite term in Korea, serving as an advisor to the South Korean government on banking and taxation. His travel orders designated his assignment in Korea as “permanent duty.” He received a 25% overseas differential in addition to his base salary. He sought to deduct $1,540 for the cost of living in Korea, claiming it was “away from home” while maintaining a home for his wife and son in Ohio. Carroll kept no detailed records of these expenditures.

    Procedural History

    The Commissioner of Internal Revenue disallowed Carroll’s deduction for expenses incurred in Korea, resulting in a tax deficiency. Carroll contested this adjustment before the United States Tax Court.

    Issue(s)

    1. Whether the expenses incurred by the taxpayer for meals and lodging while working in Korea are deductible as “traveling expenses…while away from home” under Section 23(a)(1)(A) of the Internal Revenue Code.

    2. Whether the expenses are deductible as ordinary and necessary expenses paid for the production or collection of income under Section 23(a)(2) of the Internal Revenue Code.

    Holding

    1. No, because the taxpayer’s “home” for tax purposes was his principal place of employment in Korea, and therefore the expenses were not incurred “away from home.”

    2. No, because these expenses were personal, living expenses and are not deductible under Section 23(a)(2) of the Code.

    Court’s Reasoning

    The court reasoned that determining the location of the taxpayer’s “home” is a crucial preliminary step in deciding whether expenses are deductible as “traveling expenses…while away from home.” The court found that Carroll’s employment in Korea was for an indefinite term, as evidenced by his employment agreement and travel orders designating Korea as his “permanent duty station.” The court distinguished this situation from temporary employment, where a taxpayer may have a regular place of business and incur temporary expenses elsewhere. The court cited prior cases, such as Todd, where similar expenses were denied because the taxpayer’s post was considered their home for tax purposes. Regarding Section 23(a)(2), the court emphasized that personal, living, or family expenses are not deductible, even if somewhat related to income production. The court stated, “Personal expenses are not deductible, even though somewhat related to one’s occupation or the production of income.”

    Practical Implications

    Carroll v. Commissioner clarifies the definition of “home” for tax purposes, particularly for individuals employed in indefinite assignments away from their traditional residence. This case reinforces that the principal place of employment is generally considered the tax home, precluding deductions for living expenses in that location. The decision emphasizes the importance of differentiating between temporary and indefinite employment when claiming travel expense deductions. Later cases have cited Carroll to support the denial of deductions where the taxpayer’s employment is considered indefinite, even if it involves relocation. Attorneys should advise clients to carefully document the nature and duration of their employment assignments and to understand that the IRS will likely consider the principal place of employment as the tax home unless the assignment is clearly temporary.