Bark v. Commissioner

Arnold P. Bark, Petitioner, v. Commissioner of Internal Revenue, Respondent Bark v. Commissioner Docket No. 6065 United States Tax Court 6 T.C. 851; 1946 U.S. Tax Ct. LEXIS 213; April 29, 1946, Promulgated *213 Decision will be entered for the respondent. The petitioner is a resident of Pittsburgh, Pennsylvania. In the late fall of 1939 he accepted employment with the Midvale Co. to supervise the installation of a heavy forging press at its plant in Philadelphia. His post of duty was to be at Philadelphia. It was expected that the employment would last for a period of only about three months. Under the terms of his employment he was to receive a salary of $ 600 per month. Any traveling that he was to do for the Midvale Co. was to be paid for by that company. Such traveling expenses are not involved in this proceeding. The petitioner was employed by the company on new assignments of like work until some time in December 1942, when it terminated, and he returned to his home in Pittsburgh. In 1941 he spent $ 340.50 for railroad fare in traveling between Philadelphia and Pittsburgh for the purpose of visiting his family and $ 649.65 for hotel rooms and $ 749.05 for meals while in Philadelphia, all of which amounts petitioner claimed as deductions from gross income in his income tax return for 1941. In the determination of the deficiency the respondent allowed the deduction of the*214 amount spent for railroad fare as traveling expenses, but disallowed the items of $ 649.65 and $ 749.05 spent for lodging and meals in Philadelphia. Held, that the disallowed items are not legal deductions from gross income. Albert C. Hirsch, Esq., for the petitioner. Karl W. Windhorst, Esq., for the respondent. Smith, Judge. Murdock, J., dissenting. Turner and Van Fossan, JJ., agree with this dissent. SMITH *851 This proceeding is for the redetermination of a deficiency in income tax for 1941 of $ 317.02. The petitioner alleges that the respondent erred in disallowing from gross income the amounts spent by him in 1941 for meals and lodging*215 in Philadelphia, Pennsylvania, upon the ground that they are deductible from gross income as traveling expenses incurred by him while away from home in the pursuit of his trade or business. FINDINGS OF FACT. The petitioner is a resident of Pittsburgh, Pennsylvania, where he has lived for many years, where he owns his home, and where his wife *852 and two daughters reside. He filed his income tax return for 1941 with the collector of internal revenue for the twenty-third district of Pennsylvania, at Pittsburgh. For a number of years prior to 1939 the petitioner had been employed by the United Engineering & Foundry Co., which had manufactured and erected many heavy forging presses at different steel plants. Through his long employment with that company the petitioner had become skilled in the manufacture, erection, and installation of such presses. About twenty years prior to 1939 the company had installed a 6,500-ton forging press at Charleston, West Virginia. In 1939 the Midvale Co., of Philadelphia, Pennsylvania, desired to acquire this press and have it removed and installed at its plant in Philadelphia. It inquired of the United Engineering & Foundry Co. the name of some*216 person who could supervise the removal of the press and its installation at its plant. That company gave the Midvale Co. the name of the petitioner as one who was qualified to do such work if he was available. The Midvale Co. called the petitioner on the telephone and asked him if he was available for the work. At the time the petitioner was unemployed and replied that he was available. He was requested to go to Philadelphia to see Midvale's president for the purpose of completing arrangements for his employment. Before the petitioner was employed he was told that his services would be required for a period of only about three months and that his services would not be required after the press had been installed. Petitioner agreed to accept such temporary employment. His employment with Midvale started in November 1939. Under the terms of employment the petitioner's post of duty was to be in Philadelphia. All traveling expenses of the petitioner, including meals and lodging incurred by him while on business for the Midvale Co. away from Philadelphia, were to be paid by the company. Such traveling expenses are not involved in this proceeding. The petitioner was to be permitted*217 to visit his home in Pittsburgh over week ends as he wished, but all such expenses, as well as lodging and meals in Philadelphia, were to be borne by the petitioner out of his monthly compensation of $ 600. Before work on the installation of the 6,500-ton forging press was completed, Midvale had an opportunity to buy from a second-hand dealer another forging press which was located in Rochester, New York. Before purchasing this press Midvale sent the petitioner to Rochester to inspect it. After making such inspection the petitioner advised Midvale to purchase the press. This advice was accepted upon an agreement of the petitioner to supervise the removal and installation of this press upon the same terms as had been made with him for the installation of the 6,500-ton press. This work was completed *853 about the end of December 1940. In the meantime Midvale had been negotiating for the erection on land owned by it of a 14,000-ton press for the United States Navy. It was estimated that about 12 months would be required for the fabrication of the press and several additional months for its erection and installation. The petitioner was employed to supervise the manufacture*218 and installation of this press. The work lasted until about the end of 1942. Upon its completion petitioner returned to his home in Pittsburgh. The petitioner was on the pay rolls of the Midvale Co. from November 1939 until some time in December 1942, at a salary of $ 600 per month. All during this period he had no other employment. He had no office or place of business in Pittsburgh and had no business listing in the Pittsburgh telephone directory. All of his trips made from Philadelphia to Pittsburgh were for the purpose of visiting his family and were not required in connection with his employment by the Midvale Co. During 1941 the petitioner visited his family in Pittsburgh twice a month or oftener. In 1941 he spent $ 340.50 for railroad fare between Philadelphia and Pittsburgh, $ 649.65 for hotel rooms, and $ 749.05 for meals while in Philadelphia, all of which amounts the petitioner deducted from gross income in his income tax return for 1941. In the determination of the deficiency the respondent allowed the deduction of $ 340.50 spent for railroad fare in traveling between Philadelphia and Pittsburgh, but disallowed the deduction of the items of $ 649.65 for hotel rooms*219 and $ 749.05 for meals, or a total disallowance of $ 1,398.70. The reason stated in the deficiency notice for the disallowance is that the: * * * alleged living expenses (hotel, etc.) incurred while in Philadelphia, Pennsylvania, included in "deductible expenses" of $ 1,739.20 and deducted from salary reported in the amount of $ 6,960.00 is disallowed, as it is held that the item in question was not an ordinary and necessary expense of any trade or business carried on by you while away from home in the pursuit of such trade or business. The amount in question, therefore, is held to be a personal expense. OPINION. The question presented is the right of petitioner to deduct from his gross income of 1941 $ 649.65 for hotel rooms and $ 749.05 for meals spent in 1941 while the petitioner was in Philadelphia. The disallowed items are claimed as deductions from gross income under section 23, Internal Revenue Code, as amended, which permits the deduction from gross income of: (a) Expenses. -- (1) Trade or business expenses. -- (A) In General. -- All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable*220 *854 allowance for salaries or other compensation for personal services actually rendered; traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business; * * * Section 24, Internal Revenue Code, provides in material part as follows: (a) General Rule. -- In computing net income no deduction shall in any case be allowed in respect of -- (1) Personal, living, or family expenses. (A)-2 (A)-2 Section 19.23 (a)-2 of Treasury Regulations 103, promulgated under the provisions of the Internal Revenue Code, states: Sec. 19.23 (a)-2. Traveling expenses. -- Traveling expenses, as ordinarily understood, include railroad fares and meals and lodging. If the trip is undertaken for other than business purposes, the railroad fares are personal expenses and the meals and lodging are living expenses. If the trip is solely on business, the reasonable and necessary traveling expenses, including railroad fares, meals, and lodging, are business expenses. * * * * * * * Only such expenses as are reasonable and necessary in the conduct of the business and directly attributable to it may be deducted. * * * * * * * Commuters' fares *221 are not considered as business expenses and are not deductible. In Commissioner v. Flowers, 326 U.S. 465, it was said of this regulation that it: * * * is precisely the same as that given to identical traveling expense deductions authorized by prior and successive Revenue Acts, is deemed to possess implied legislative approval and to have the effect of law. * * * Whether or not such expenses as those here involved are legal deductions from gross income as "traveling expenses" under the law and the regulations of the Commissioner must be determined upon the facts of the particular case. Where a taxpayer in the prosecution of his trade or business is required to travel, all of his traveling expenses, including amounts spent for meals and lodging, while away from home, are legal deductions from gross income. Thus, any business man or professional man who is required to travel to earn his income is entitled to deduct his traveling expenses. Even where a man has no office or place of business in his home city he is entitled to deduct as traveling expenses amounts spent for transportation and for meals and lodging while away from home in the pursuit *222 of his trade. In Harry F. Schurer, 3 T. C. 544, we held that a journeyman plumber, whose home was in Pittsburgh and who in 1941 accepted temporary employment at different locations, was entitled to deduct amounts spent for board and lodging and railroad and bus fares while *855 away from home in earning his compensation. The question arises whether the facts of this case bring it within the ambit of the Schurer case. The petitioner contends that his employment with the Midvale Co. was on a temporary basis and that the ruling made in the Schurer case is likewise applicable to him. We do not think that the facts here are comparable with those which obtained in the Schurer case. Although the petitioner well understood when he accepted his first employment with the Midvale Co. that it was to be for a period of only three or four months, the situation was vastly different so far as it relates to the year 1941. What was originally temporary employment had by 1941 become an employment of indeterminate duration. Petitioner's post of duty was Philadelphia. None of the traveling by the petitioner in 1941 with which we are here concerned was*223 in pursuance of the petitioner's trade or business. If he had moved his family to Philadelphia where his post of duty was he would not have been required to travel from Philadelphia to Pittsburgh and would have had no claim to the deduction of his board and lodging in Philadelphia. The retention of his home in Pittsburgh was by the petitioner's choice. We think that the petitioner is not entitled to the deduction of the items here in question as traveling expenses. The facts in this case are strikingly similar to those which obtained in Mort L. Bixler, 5 B. T. A. 1181. The taxpayer there was a resident of Mobile, Alabama. It was his practice to obtain contracts for the organization and management of state and municipal fairs and expositions. He claimed the right to deduct from his gross income amounts spent by him for railroad fare, lodging, meals, and laundry while away from home. In our opinion we stated: * * * In the opinion of the Board, traveling and living expenses are deductible under the provisions of this section [section 214 (a) (1), Revenue Act of 1921] only while the taxpayer is away from his place of business, employment, or the post*224 or station at which he is employed, in the prosecution, conduct, and carrying on of a trade or business. A taxpayer may not keep his place of residence at a point where he is not engaged in carrying on a trade or business, as this petitioner testified was true in this instance, and take a deduction from gross income for his living expenses while away from home. We think section 214 (a) (1) intended to allow a taxpayer a deduction of traveling expenses while away from his post of duty or place of employment on duties connected with his employment. During the taxable year this petitioner was not engaged in the carrying on or pursuit of any trade or business at Mobile. * * * We therefore disallowed the deductions claimed. For a like reason we are of the opinion that the petitioner is not entitled to the deductions here claimed. He had no office or place of business in Pittsburgh and the disallowed items can not properly be *856 regarded as "traveling expenses." See also Commissioner v. Flowers, supra. Decision will be entered for the respondent. MURDOCK Murdock, J., dissenting: I do not think this case can be distinguished satisfactorily*225 from the case of Harry F. Schurer, 3 T. C. 544. Furthermore, I do not understand how the Commissioner could allow the expense of the petitioner's railroad tickets to visit his family and deny the living expenses while away from Pittsburgh. It should have been just the other way around.