Opinion · United States Tax Court
Carroll v. Commissioner
20 T.C. 382
- Type
- Opinion
- Court
- United States Tax Court
- Jurisdiction
- Federal
- Date
- 1953-05-20
- Topic
- general
OPINION. Black, Judge: Petitioner has submitted no brief in this proceeding but we have considered his case carefully. The reasonableness of the $5 a day for meals and lodging which petitioner claims for 1948 while employed by the War Department in a civilian capacity for service in Korea is not questioned, if petitioner is entitled to any deduction at all. Respondent has not disallowed the deduction on the ground of the unreasonableness of the amount. He stated his ground for disallowance in the deficiency notice as follows: It is held that alleged traveling expenses of $1,540.00, incurred at your post of duty in Korea, are not allowable as a deduction in computing net income for the taxable year 1948.
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CARROLL v. COMMISSIONER OF INTERNAL REVENUE,20 T.C. 382(1953)
MICHAEL J. CARROLL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE,
RESPONDENT.
Docket No. 37600.
United States Tax Court.
Promulgated May 20, 1953.
Commissioner describes Korea as my post of duty and holds that expenses of $1540.00 incurred in Korea are not allowable as a deduction in computing net income.
FINDINGS OF FACT.
Petitioner and his wife filed a joint tax return for the taxable year 1948 with the collector at Baltimore, Maryland.
During 1946, petitioner purchased a home in Edgewater, Maryland, where he and his wife and son lived. During 1948, while petitioner was in Korea, petitioner rented his home in Maryland. Meanwhile petitioner's wife and son lived in Elyria, Ohio.
In the fall of 1947, petitioner entered into an employment agreement with the War Department. The details of the agreement are set forth in an agreement dated October 9, 1947. Clause 3 of the agreement provided:
3. Your appointment is of indefinite tenure. You are required to remain in service with this command at least a year from the time of arrival at permanentPage 383duty station, except where otherwise noted on the face of the WD-Form 50, in order to be entitled to return transportation to your point of hire at Government expense, unless you are separated sooner for reasons acceptable to the Government not involving misconduct. The particular employing unit, the location of the work, and the advisability of any transfer within the command will be in the sole discretion of this command.
On October 21, 1947, travel orders were issued to petitioner. The pertinent parts of these travel orders are:
1. Mr. Michael J. Carroll, Advisor, Bur. of Banking and Taxation, CAF-12, $5905.20 p/a, (Req. K-1108), is hereby directed to proceed by air on or about 23 October 1947 from Washington, D.C., to Fairfield-Suisum Army Air Field, California for further movement by air on or about 24 October 1947 to Korea, for further assignment to permanent duty. NW-US-3D-0016-WD-11.
2. Travel by military aircraft is directed as necessary in the military service for the accomplishment of an emergency mission and is chargeable to 801-95 P415-02, 03 A2182700 S99-999.
* * * * * * *
4. a. Baggage to accompany the individual by air will be marked with the owner's full name, will be limited to sixty-five (65) pounds and will accompany the individual to the port of aerial embarkation.
b. Baggage to be shipped by water must not exceed three hundred thirty-five (335) pounds * * *
* * * * * * *
6. In lieu of subsistence, a flat per diem of $6.00 while within and $7.00 while outside the continental limits of the United States is authorized in accordance with existing law and regulations while traveling and absent from permanent station. No per diem is authorized while traveling on board vessels where the cost of passage includes meals.
The basic salary of petitioner was $5,905.20 per year. In addition, the War Department agreed to pay petitioner a 25 per cent overseas differential, or $1,476.30 additional. The petitioner's annual rate of compensation based on a 40-hour week was $7,381.50. Petitioner, according to the personnel report of the War Department had a minimum tour of duty of 1 year and his employment was described as an "Excepted Appointment." During 1948, petitioner earned wages of $7,113.70 from the War Department and was paid that amount.
While in Korea petitioner served as an advisor to the South Korean Government on banking and taxation. On October 30, 1948, travel orders were issued to petitioner ordering him to return to the United States for the purpose of separation.
On the 1948 tax return petitioner claimed a deduction of $1,540, describing it as follows:
For cost of living away from home while still maintaining my home for my wife and son on East River St., Elyria, Ohio, during the period of my assignment in Korea, January 1, 1948 to date of departure, Nov. 4, 1948, a total of 308 days at an estimated cost of $5.00 per day.
The length of my stay in Korea was necessarily indefinite, because of local conditions.Page 384Petitioner kept no detailed account of these expenditures which are now claimed by him as a deduction from gross income.
Petitioner's home within the meaning of section 23 (a) (1) (A) of the Code was in Korea while he was employed there by the War Department.
OPINION.
The reasonableness of the $5 a day for meals and lodging which petitioner claims for 1948 while employed by the War Department in a civilian capacity for service in Korea is not questioned, if petitioner is entitled to any deduction at all. Respondent has not disallowed the deduction on the ground of the unreasonableness of the amount. He stated his ground for disallowance in the deficiency notice as follows:
It is held that alleged traveling expenses of $1,540.00, incurred at your post of duty in Korea, are not allowable as a deduction in computing net income for the taxable year 1948.
Petitioner contends that he is entitled to a deduction of $1,540 for traveling expenses during the year 1948, and he relies on section 23 (a) (1) (A) and (a) (2) of the Code as applied inHarry F. Schurer,3 T.C. 544, andWallacev.Commissioner,144 F.2d 407. The facts in the instant proceeding do not bring petitioner's expenses within the ambit of the holdings of either of these two cases.
First, we consider section 23 (a) (1) (A) of the Code. The particular phrase we are concerned with is "traveling expenses * * * while away from home." This phrase has been considered by various courts, including the Supreme Court inCommissionerv.Flowers,326 U.S. 465. In reaching a decision in this type case, a preliminary fact to be determined is where is the taxpayer's home within the meaning of the applicable statute. Once this fact has been decided, frequently the correct result then becomes readily apparent. Respondent contends that within the meaning of the applicable statute petitioner's home was in Korea. Petitioner contends that his home during 1948 was in Elyria, Ohio, where his wife and son lived and that his employment in Korea was "temporary." Petitioner's contentions are inconsistent with his travel orders and employment agreement as set forth in our Findings of Fact. As we understand these documents, petitioner's employment was for an "indefinite" term, rather than a "temporary" one. What we said inHenry C. Warren,13 T.C. 205, is applicable here:
Petitioner citesE. G. Leach,12 T.C. 20, in support of the disputed deductions. In that case the taxpayer husband was temporarily employed at numerous locations during the course of a taxable year. A deduction for travel expenses was allowed by this Court on the ground that the taxpayer had no regular post ofPage 385duty or place of employment during the taxable year. In the case at bar petitioner was continuously employed at one post of duty, the Navy Yard in Charleston, South Carolina, for more than two years. His employment there was not temporary, but indefinite. There is a well recognized difference between "indefinite" employment and "temporary" employment.John D.Johnson, supra. * * *
An examination of paragraph 6 of petitioner's employment agreement reveals that "while traveling and absent from permanent station" petitioner was to be paid either $6 or $7 per day. No such per diem for travel was paid to petitioner during the 308-day period in question. In other words, petitioner's employer, the War Department, considered petitioner's permanent station to be in Seoul, Korea, and, as far as the employer was concerned, petitioner was not in a travel status. In other cases where the taxpayer incurred like expenses under similar circumstances we have denied the deduction claimed.Andrewsv.Commissioner,179 F.2d 502, affirming our Memorandum Opinion;William W. Todd,10 T.C. 655. The circumstances which were present in theToddcase,supra,were very similar to those in the instant case except that Todd, who was employed by the army in a civilian capacity, was stationed at an army post here in this country, whereas petitioner was stationed in a foreign country, but we think this makes no difference tax-wise.
Based upon all the facts, we have determined that petitioner's home within the meaning of section 23 (a) (1) (A) was in Korea, the place of petitioner's employment. It is settled that the taxpayer may not use section 23 (a) (1) (A) in order to secure a deduction from gross income for traveling expenses incurred at the taxpayer's principal place of employment.Beatrice H. Albert,13 T.C. 129;Virginia RuizCarranza(Zuri),11 T.C. 224;S. M. R. O'Hara,6 T.C. 841. Since the expenses in question were incurred by petitioner at his principal place of employment, they are not deductible under section 23 (a) (1) (A) of the Code.
We now consider petitioner's alternative argument based upon deductibility under section 23 (a) (2) of the Code.1Petitioner reasons that in order to produce income (the overseas salary differential of $1,422.74 earned during 1948) he spent $1,540 in Korea. Section 23 (a) (2) of the Code was added to the Code by the Revenue Act of 1942. This Code section is limited in scope by the prohibitions of Code section 24 (a) (1) against deduction of personal, living, orPage 386family expenses,Ralph D. Hubbart,4 T.C. 121. What we said there is applicable here: "Personal expenses are not deductible, even though somewhat related to one's occupation or the production of income." These expenses of the petitioner are his personal expenses, and even though incurred in Korea are not deductible by him under section 23 (a) (2). See Regulations 111, section 29.23 (a)-15.Decision will be entered for the respondent.
- SEC. 23. DEDUCTIONS FROM GROSS INCOME.
In computing net income there shall be allowed as deductions:
(a) EXPENSES. —
* * * * * * *(2) Non-trade or non-business expenses. — In the case of an individual, all the ordinary and necessary expenses paid or incurred during the taxable year for the production or collection of income, or for the management, conservation, or maintenance of property held for the production of income.
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