Schweighardt v. Commissioner

Robert J. Schweighardt and Marjorie J. Schweighardt, Petitioners v. Commissioner of Internal Revenue, Respondent Schweighardt v. Commissioner Docket No. 4918-68 United States Tax Court 54 T.C. 1273; 1970 U.S. Tax Ct. LEXIS 119; June 15, 1970, Filed *119 Decision will be entered under Rule 50. Held: 1. Petitioners are entitled to deduct under sec. 162, I.R.C. 1954, traveling expenses including living costs of one petitioner during the time he was teaching in Korea as a Fulbright grantee. Laurence P. Dowd, 37 T.C. 399 (1961), followed. 2. Petitioners are not entitled to deduct the cost of transporting the family and a package of household goods of the Fulbright grantee to and from Korea since Korea was not a "new principal place of work" for this petitioner within the meaning of sec. 217, I.R.C. 1954. Sec. 1.217-1(c)(3)(iii), Income Tax Regs., held valid. Robert J. Schweighardt, pro se. Michael J. Christianson, for the respondent. Scott, Judge. SCOTT *1273 Respondent determined deficiencies in petitioners' income taxes for the calendar years 1964 and 1965 in the amounts of $ 390 and $ 313, respectively. The issues for decision are: (1) Whether petitioner Robert J. Schweighardt is entitled to deduct as moving expenses in each of the years here in issue the cost of transporting his wife and children and one package of household goods to and from Korea where he was teaching as a Fulbright grantee for the period from late August 1964 to mid-June 1965. (2) In the alternative if petitioner is entitled to deduct moving expenses for transporting his family and household goods to and from Korea, should the amounts of $ 2,112 and $ 2,752 which he deducted for traveling expenses while away from home in the years 1964 and 1965, respectively, be disallowed. FINDINGS OF FACT Some of the facts*121 have been stipulated and are found accordingly. Petitioners, husband and wife whose legal residence was Running Springs, Calif., at the date of the filing of the petition herein, filed their joint Federal income tax returns for the calendar years 1964 and 1965 with the Director of International Operations, Washington, D.C. *1274 Robert J. Schweighardt (hereinafter referred to as petitioner), while employed as a teacher at Chaffey Union High School in Ontario, Calif., received a Fulbright grant to perform a teaching assignment in Seoul, Korea, for the academic year 1964-65, under the auspices of the U.S. Educational Commission in Korea. While in Korea petitioner was paid in nonconvertible Korean currency. The term of the Fulbright grant was from August of 1964 to June of 1965. Petitioner was granted a 1-year leave of absence by the Chaffey Union High School so that he might accept the Fulbright grant. Petitioner and has family departed from Ontario, Calif., on August 16, 1964, and arrived in Korea on August 23, 1964. Petitioner remained in Korea teaching as a Fulbright grantee until June 12, 1965, and his family during this period lived with him in Korea. On June 12, 1965, *122 petitioner and his family departed from Korea and arrived in Ontario, Calif., on June 18, 1965, and petitioner resumed his employment as a teacher in Chaffey Union High School in Ontario, Calif. At the time the grant was made to petitioner it was for the designated period of the academic year 1964-65. Had the project to which petitioner was devoting his time not been completed and had petitioner applied for an extension, he could have been allowed a grant for 1 additional academic year. Petitioner actually completed his project during the period of the original grant and did not apply for an additional grant. Petitioners on their income tax return for the calendar year 1964 deducted as traveling expenses the amount of $ 2,112 and deducted as moving expenses for transportation of petitioner's family and moving of household goods the amount of $ 1,959. No amount for petitioner's transportation was included in the claimed moving expense deduction since petitioner's transportation was furnished by the U.S. Educational Commission. 1 The items composing the claimed moving expenses were $ 1,385 for air transportation of petitioner's wife and three children and $ 574 for transportation*123 of household and personal property. Petitioners placed their furniture in storage in California before they left for Korea. Petitioners on their Federal income tax returns for the calendar year 1965 deducted the amount of $ 2,752 as traveling expenses and deducted the amount of $ 1,755 as moving expenses. No amount was included in the claimed deduction of moving expenses for petitioner's fare from Korea to California since his transportation was furnished by the U.S. Educational Commission. The amount deducted by petitioner *1275 as moving expenses was composed of $ 1,385 for air transportation for petitioner's wife and three children and $ 370 for transportation of household and personal property. Respondent*124 in his notice of deficiency disallowed petitioners' claimed deductions for moving expenses in each of the years here in issue with the following explanation: "It is determined that the deductions for moving expenses of $ 1,959 in 1964 and $ 1,755 in 1965 are not allowable because you have not established that you are entitled to such deductions." Respondent did not disallow the deductions claimed by petitioner in the amounts of $ 2,112 and $ 2,752 as traveling expenses for the calendar years 1964 and 1965, respectively, but by amended answer alleges in the alternative that if petitioner is entitled to the claimed deduction for moving expense on the basis that Korea was a new principal place of work for him within the meaning of section 217, I.R.C. 1954, 2 then petitioner's claimed deductions for traveling expenses while away from home should be disallowed. OPINION Petitioner takes the position that the mere fact that he was a Fulbright grantee being paid in*125 nonconvertible currency entitled him to deduct his living expenses while in Korea as traveling expenses. He relies on a publication of the Office of International Operations, U.S. Treasury Department -- Internal Revenue Service, referred to as Information Guide No. 1 (rev. 5-63), 3 which he states was a ruling made specifically to alleviate an otherwise inequity for Fulbright grantees paid in nonconvertible currency. Petitioner contends that the fact that he is allowed to deduct traveling expenses while away from home should not penalize him by causing him not to be entitled to deduct moving expenses under section 217. *126 In Laurence P. Dowd, 37 T.C. 399 (1961), we held that a Fulbright lecturer who was in Japan from October of 1955 until July of 1957 *1276 under the auspices of the U.S. Educational Commission in Japan was entitled to deduct his living expenses in Japan as traveling expenses while away from home in the pursuit of a trade or business under section 162(a)(2). In so holding we pointed out that "By its very nature, the Fulbright grant was temporary, since it was for a fixed period of 10 months." We further pointed out that although the taxpayer in the Dowd case received an extension of his original grant and remained in Japan for some 21 months there was no indication that he intended to remain indefinitely or permanently in Japan. Our conclusion in Laurence P. Dowd that the taxpayer was entitled to deduct his traveling expenses was on the basis that his work as a Fulbright lecturer was temporary. Our holding was in accordance with our holding in a number of cases that in order to be entitled to deduct traveling expenses while away from home in the pursuit of a trade or business under section 162(a)(2) a taxpayer must show that his work at the*127 location where the expenses were incurred was temporary as distinguished from indefinite or permanent. Under our holding in Laurence P. Dowd, supra, we conclude that petitioner is entitled to the deduction for his living expenses in Korea as traveling expenses while away from home in the pursuit of a trade or business. It is therefore necessary to decide whether a deduction under section 217 for moving expenses is allowable to a person who incurs such expenses in transporting his family and household goods to a place at which he was temporarily employed so as to be considered away from home in the pursuit of a trade or business. Section 217 which was added to the Code by section 213(a)(1), Pub. L. 88-272 (Feb. 26, 1964), to apply to expenses incurred after December 31, 1963, for taxable years ending after that date provides for the allowance as a deduction of moving expenses "incurred during the taxable year in connection with the commencement of work by the taxpayer * * * at a new principal place of work." Respondent in his regulations dealing with allowance of a deduction for moving expenses, section 1.217-1(c)(3)(iii), Income Tax Regs., provides: *128 In general, a place of work is not considered to be the taxpayer's principal place of work for purposes of this section if the taxpayer maintains an inconsistent position, for example, by claiming an allowable deduction under section 162 (relating to trade or business expenses) for traveling expenses "while away from home" with respect to expenses incurred while he is not away from such place of work and after he has incurred moving expenses for which a deduction is claimed under this section. Petitioner recognizes and has stipulated that none of the deduction claimed by him as traveling expenses was incurred by him in 1964 *1277 while moving to Korea or in 1965 while moving from Korea but was all for expenses while in Korea. Petitioner recognizes that under respondent's regulations Korea would not be considered to be his principal place of work for the purpose of section 217. Petitioner's argument is that this regulation works unfairly in his case since respondent in issuing the Information Guide for Fulbright Grantees has allowed the traveling expenses to be deductible because Fulbright grantees are paid in nonconvertible currency but are not permitted to exclude this payment*129 from their U.S. taxable income. 4 Petitioner contends that it is inequitable not to allow a Fulbright grantee to deduct moving expenses. He argues that this in effect removes part of the benefits which were intended to be given to him to compensate for the fact of the payment made to him while in Korea being in nonconvertible foreign currency. Petitioner cites no authority for the reason he gives for respondent's recognizing the right of a Fulbright grantee to deduct his living expenses in a foreign country as traveling expenses. The sections of the Information Guide released by respondent on which petitioner relies do not base the allowance on the fact that a Fulbright grantee is paid in nonconvertible*130 currency but only on the fact that he is temporarily away from home in the pursuit of a trade or business. As above pointed out, it is on the basis that a Fulbright grantee is temporarily away from home in the pursuit of a trade or business that we held his expenses to be deductible in Laurence P. Dowd, supra. In our view respondent's regulation providing that in general a place of work is not to be considered a taxpayer's principal place of work under section 217 if a deduction is allowable for traveling expenses while away from home under section 162 is a reasonable interpretation of the statute. The reference in section 217 to a new "principal place of work" means a new place where the taxpayer will be employed on a permanent or indefinite basis as distinguished from a temporary basis. This is the interpretation of the reference to a new "principal place of work" adopted in respondent's regulation. We therefore sustain respondent in his disallowance of petitioner's claimed deduction for moving expenses. At the request of the parties to enable them to further check payments made by petitioner, Decision will be entered under Rule 50. Footnotes 1. There is no issue here concerning the deductibility of petitioner's transportation expenses. Although the record is not clear, apparently the value of such transportation was not included by petitioner in his income as reported and respondent made no adjustment in this respect in his notice of deficiency.↩ 2. All references are to the Internal Revenue Code of 1954.↩ 3. The portion of this document upon which petitioner primarily relies are the following: "Professional and Teaching Grantees -- A Fulbright grant (including amounts received in cash for rail fare from the port of debarkation to the teaching post and the value of transportation to the foreign country furnished in kind by the government) received for the purpose of lecturing or teaching represents compensation for services rendered and accordingly is subject to United States Income Tax. Inasmuch as a Fulbright grant is paid by an agency of the United States Government such grant cannot qualify for exemption from tax under the provisions of law concerning 'presence in a foreign country' or 'foreign residence.' * * * * "The deductibility of expenses incident to a grant arises only when amounts received are includible in gross income. A professor or teacher, regularly employed by an educational institution in the United States who is merely temporarily absent for the purpose of teaching or lecturing abroad may generally deduct the actual cost of all his travel, meals and lodging while away from home. For tax purposes, a taxpayer's home is his regular post of duty or principal place of employment."↩ 4. In Laurence P. Dowd, 37 T.C. 399 (1961), we held that the Fulbright grantee, although paid in nonconvertible Japanese currency, was paid by the United States or an agency thereof within the meaning of sec. 911, I.R.C. 1954↩, and therefore could not exclude from his taxable income such payment.