Preston v. Commissioner

William D. and Susan E. Preston v. Commissioner. Preston v. Commissioner Docket Nos. 84162 and 88529. United States Tax Court T.C. Memo 1961-250; 1961 Tax Ct. Memo LEXIS 100; 20 T.C.M. (CCH) 1304; T.C.M. (RIA) 61250; August 31, 1961 William D. Preston, pro se, 105 Avenue C West, Barksdale A.F.B., La. John W. Dierker, Esq., for the respondent. SCOTT Memorandum Opinion SCOTT, Judge: The respondent determined deficiencies in petitioners' income tax for the years 1957 and 1958 in the amounts of $376.42 and $153.34, respectively. The sole issue for decision is whether petitioners are entitled to deduct amounts expended by them for club dues and expenses, meals and other refreshments for themselves and guests, nursery charges for care of their children during social functions, and similar items as ordinary and necessary business expenses for entertainment. All*101 of the facts have been stipulated, some by written stipulation and others by oral stipulation of the parties at the trial, and are found accordingly. Petitioners, husband and wife, filed joint income tax returns for the years 1957 and 1958 with the district director of internal revenue at Baltimore, Maryland. William D. Preston (hereinafter referred to as petitioner) is a colonel in the United States Air Force. He is a medical officer on active duty. During the years 1957 and 1958 petitioner served as Commander of the 4230th United States Air Force Hospital and in two other capacities as division surgeon of the Fourth Air Division and the base surgeon. For portions of these years, he also served as Commander of the 376th Tactical Hospital and as Commander of the 301st Tactical Hospital. Petitioner incurred expenses for entertainment in the amount of $1,098.08 in 1957 and $466.11 in 1958. During the years 1957 and 1958 petitioner expended for the items indicated amounts as follows: Date Function Cost [1957] Jan. 9 Club charges $ 19.95 [10] Medical wives' coffee .75 [12] Dinner party for Hospital Department Heads and Base Commander (12 guests) 67.60 Flowers… $ 5.00 Maid… $11.60 Liquor… 22.00 Nursery fees for peti- Food… 20.00 tioner's two chil- Waiter… 6.00 dren during party… 3.00 [25] Nursery fee for children during Air Base Group party 1.40 [26] Cocktail party for 16 members of hospital staff 34.95 Liquor… $25.00 Canapes, etc…. $3.00 Flowers… 5.00 Nursery… 1.95 Feb. 1 Club charges 14.00 Air Base Group party, Jan. 25… $5.00 Wives club luncheon… 1.25 Club dues… 7.75 Feb. 4-7 Visit of USAF Medical Inspection Team Feb. 4 - Cocktails and dinner for key personnel of team 9.00 Cocktails… $5.00 Canapes… 1.00 Nursery fees… 3.00 (Club charges below) Feb. 6 - Dinner party for team members (17 people) 68.20 Waiter… $7.00 Food… $22.00 Maid… 7.20 Liquor… 20.00 Cook… 3.50 Ice….50 Flowers… 5.00 Nursery… 3.00 Feb. 7 - Reception at club (pro rata share) 5.00 Nursery 3.00 Feb. 14 376th Wing coffee .75 [22] Nursery charges during organizational party 3.00 (Club charges below) Mar. 1 Club charges $ 20.30 [7] Cocktail party and dinner for consultant from USAF Headquarters (din- ner charges on club bill below) Liquor, canapes, etc. 4.85 Nursery charges 2.00 [8] Medical party (pro rata share) 4.00 Nursery 3.00 [14] Coffee for medical wives (45 people) 26.52 Flowers… $6.00 Rolls (bakery)… $3.72 Punch….60 Rolls (homemade)… 3.00 Coca cola….50 Mints… 1.00 Coffee….86 Silver polish….29 Cream….50 Maid service… 9.00 Nursery… 1.05 [23] Nursery fees during 4th Air Division party 3.00 Apr. 1 Luncheon for visiting physicians 8.00 [7] Club charges 21.15 [27] Holiday in Dixie Benefit Fashion Show at Barksdale - Tickets. Share in entertainment of local guests (See club charges) 10.00 Nursery 3.00 May 3 Nursery charges during 376th Wing staff dinner and dance 3.00 [25] Medical party (pro rata share) 4.00 Nursery 3.00 [28] Club charges 19.00 June 3 Club charges 19.95 [4] Nursery charges during 376th Wing staff dinner 2.00 [7] Air Base Group barbeque 4.00 Nursery fee 2.00 9-12 Visit of Deputy Surgeon General of Thailand to Barksdale 15.00 June 9 Lunch… $ 3.00 Dinner… 12.00 June 10 Lunch 4.00 Party for Base dignitaries, hospital officers and officers of office of surgeon, 2nd AF, in honor of visitor 123.50 Liquor… $75.00 Flowers… $6.00 Maid… 8.00 Waiter (tip)… 3.00 Ham… 15.00 Nursery fees… 2.65 Food and misc…. 13.85 Club charges below June 11 Lunch and dinner 7.00 June 12 Curry lunch 5.00 [13] Medical wives' coffee .75 [18] Dinner for Base and hospital chaplains and Base missioner 19.50 [26] Nursery fees during organizational party 2.00 July 2 Nursery fees during 376th Wing staff dinner 2.00 [11] Party for departing Chief of Staff, 2nd AF (club charges below) 1.00 Nursery fees 3.00 Hospital wives' luncheon 1.25 [14] Nursery charges during Base party (club charges below) 3.00 [17] Cocktail party and dinner for departing Base Commander (assessment) (club charges below) 2.50 Nursery fees 3.00 [22] Club charges 80.00 [23] Luncheon for visiting consultant and hospital staff members 16.00 Aug. 2 Pertinent portions of club bill 26.37 [7] 376th Wing staff dinner 8.00 Nursery fees 2.00 [8] Hospital wives' tea .75 [29] Luncheon for visiting psychiatric consultant and staff members 12.50 Dinner for visiting psychiatric consultant and staff members 28.00 Club bill 19.05 [31] Nursery charges during organizational party 2.00 Sept. 3 Nursery charges during 376th Wing staff dinner $ 2.00 [10] Dinner for visiting doctor 20.60 Nursery fee 2.00 [12] 376th Wing coffee 1.00 [12] Hospital wives' luncheon .75 [13] Air Base Group dance 4.00 Nursery charges 2.00 Oct. 10 805th Air Base Group coffee .75 [14] Club bill 19.05 [15] Coffee for departing officers' wives (32 people) 15.00 [17] Hospital wives' coffee .75 [22] Cocktail and dinner party for departing Commander General, 2nd AF (17 people) 85.00 [24] Nursery charges during 2nd AF Commanders' conference dinner 2.50 Nov. 1 Hospital hayride and barbeque 8.79 Charge… $6.00 Nursery… 2.15 Gas….64 [3] Cocktails and dinner for visiting officer (9 people) 10.50 [7] Florentine club bill 10.00 [9] Nursery during 376th Wing party 1.90 [14] Hospital wives' luncheon 1.55 [18] Club bill 19.75 [30] Cocktail party for departing Division Commander 35.00 Base dinner party for departing Division Commander 8.00 Nursery charges 2.15 Dec. 1 Club charges 29.00 [7] Dinner for visiting doctor 13.65 [12] Hospital wives' coffee .75 [15] Nursery during 301st Wing Christmas party 1.90 [15] 301st Wing Christmas party 4.00 [21] Nursery during 4AD-Air Base Group Christmas party 2.15 [25] Sherry party for members of hospital staff 10.00 [28] Hospital party 4.00 Nursery fee 2.05 Total for 1957 $1,098.08 Date [1958] Jan. 1 Open house at residence for hospital officers and spouses (73 officers) $ 64.84 [8] Officers' wives club luncheon 1.25 [16] Medical wives' breakfast .75 [16] Air Base Group game day - contribution 1.00 [21] Air Base group party 3.74 Nursery during party 1.40 [31] 301 Bomb Wing dance 5.00 Nursery during dance 1.25 Feb. 1 Chamber of Commerce - Barksdale luncheon 10.00 [12] Officers' wives club luncheon 1.25 [15] Air Base Group dance 5.00 Ticket… $2.50 Other… 2.50 [20] Medical wives' luncheon (paid for reservation not used for which group liable) 2.54 Mar. 6 4AD-Air Base Group coffee .50 [8] 301st Wing cocktail party, dance, gift for departing Commander 10.00 Nursery charges 2.45 [12] Officers' wives club luncheon 1.25 [19] Medical wives' luncheon (paid for unused reservation) 2.80 [22] 301st Wing farewell dance 2.00 Nursery charges 1.40 Apr. 9 Officers' wives club luncheon $ 1.25 [12] Air Base Group party 6.50 Nursery charges 2.15 Refreshments for decorating committee - Air Base Group party 1.10 Refreshments - head table - Air Base Group party 5.00 [17] Hospital wives' luncheon 1.55 [18] Dinner for visiting doctor at officers' club 2.90 Hospital dinner party 4.40 Nursery charges 1.65 May 24 Hospital cocktail party 5.00 [29] Air Base Group party 3.50 Nursery charges 1.40 [30] Cocktail-buffet at residence for medical consultants and wives, key base and hospital personnel 126.55 June 18-19 Meals and refreshments for houseguest at residence 12.50 [19] Hospital wives' luncheon 2.65 July 21 Hospital dining-in 5.04 [24] Hospital wives' coffee .75 Aug. 15 Command reception and dinner for departing 2nd AF Deputy commander 18.65 [21] Hospital wives' breakfast .60 Sept. 4 Air Base Group coffee .75 [13] Cocktails at residence for visiting Reserve Doctors and wives 6.00 [18] Hospital wives' breakfast .60 [24] Officers' wives club luncheon 1.25 Oct. 16 Hospital wives' luncheon 1.75 Nov. 3 Party charge (Air Base Group party not attended) 5.50 Dec. 2 Official luncheon attended by petitioner 1.35 [15] Air Base Group dinner 3.15 Nursery fee 1.40 [18] Coffee for medical wives and Commanders' wives 25.40 [22] Air Base Group party 3.00 Nursery fee 1.40 Jan.-Dec. Officers club dues - $7.00 per month 84.00 Jan.-Dec. Officers' wives club dues - $0.75 per month 9.00 Total for 1958 $ 466.11 *102 On their joint income tax return for the year 1957 petitioners deducted the amount of $1,081 with the following explanation: Entertainment required in capacity of Surgeon, BAFB and Commander, 4230th USAF Hospital. No allowance provided. On their joint income tax return for the year 1958 petitioners deducted the amount of $451 with the following explanation: Entertainment required in capacity of Surgeon, BAFB and Commander, USAF Hospital. No allowance provided. Respondent in his notices of deficiency disallowed these deductions with the explanation that such amounts did not constitute ordinary and necessary business expenses within the purview of section 162 of the Internal Revenue Code of 1954, but were personal living and family expenses within the meaning of section 262 of the Internal Revenue Code of 1954. The amounts claimed by petitioners as entertainment expenses fall generally into the categories of club dues, food and drink, attending parties, and nursery fees. The amounts for food and drink were spent for themselves and associates and visitors to the base. Petitioner offered no evidence to show that such expenditures*103 were ordinary or necessary business expenses. Petitioner is an Air Force medical officer and so far as the record shows this is his primary occupation. Petitioner in his brief quotes from books prepared for the guidance of Air Force officers and their wives as to the advisability of entertaining and attending social functions, but none of these documents, or even petitioner's own statements of his understanding of the customs in the Air Force, was offered in evidence. Even if we could assume without proof that entertaining such as petitioner did was customary in the Air Force, the record would be totally devoid of evidence that such expenditures were necessary. Cf. Nathaniel J. Hess, 24 B.T.A. 475, 479 (1931), and Bercaw v. Commissioner, 165 F. 2d 521 (C.A. 4, 1948), affirming a Memorandum Opinion of this Court. Generally, dues to a social club are nondeductible personal expenses and substantial evidence is required to support their deduction as a business expense. Western Products Co., 28 T.C. 1196, 1218 (1957). Except as specifically provided under special circumstances not here applicable, child care expense is a personal expense. Cf. Mildred A. O'Connor, 6 T.C. 323 (1946).*104 Entertaining one's associates is ordinarily a personal expense and "the presumptive nondeductibility of personal expenses may be overcome only by clear and detailed evidence as to each instance that the expenditure in question was different from or in excess of that which would have been made for the taxpayer's personal purposes." Richard A. Sutter, 21 T.C. 170, 173 (1953). Petitioners have failed to establish that respondent erred in his disallowance of the claimed deductions for entertainment expenses. Decision in Docket No. 84162 will be entered under Rule 50, and decision in Docket No. 88529 will be entered for respondent. * Footnotes *. Previous decision was deleted and new decision was added by an official order of the Tax Court dated September 27, 1961 and signed by Judge Scott.↩