1986 U.S. Tax Ct. LEXIS 92">*92
H, an economics professor at the University of Pennsylvania, was appointed as a Fairchild Scholar and received a stipend from Cal Tech in 1979.
86 T.C. 1275">*1275 Respondent determined a deficiency in petitioners' income tax for the year 1979 in the amount of $ 20,090. Several issues were settled prior to trial; the issues remaining for decision are (1) whether a stipend petitioner David Cass received during 1979 from the California Institute1986 U.S. Tax Ct. LEXIS 92">*94 of Technology was an award subject to the provisions of
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulated facts and attached exhibits are incorporated herein by this reference.
Petitioners David Cass and Janice V. Cass were husband and wife at the time they filed their joint 1979 Federal income tax return. At the time the petition herein was filed, David Cass resided in Philadelphia, Pennsylvania, and Janice V. Cass lived in Bala Cynwyd, Pennsylvania. Since Janice is a party only by virtue of having filed1986 U.S. Tax Ct. LEXIS 92">*95 a joint 86 T.C. 1275">*1276 return with David, David singularly hereinafter will be referred to as petitioner.
Petitioner has been a professor of economics at the University of Pennsylvania (Penn) since 1974. In July 1977, he received a letter from California Institute of Technology (Cal Tech) inviting him to accept an appointment as a Sherman Fairchild Distinguished Scholar for the academic year 1978-79. Petitioner accepted the invitation by a letter dated August 1, 1977.
The Sherman Fairchild Distinguished Scholar Program (Fairchild Scholar Program) was established in 1973 under a grant to Cal Tech from the Fairchild Foundation. The purpose of the Fairchild Scholar Program is to enable distinguished individuals to pursue their research and study at Cal Tech through associating with other scholars, students, and prominent individuals. The Fairchild Scholars are chosen on the basis of accomplishments and distinctions or on the basis of outstanding promise and ability. The Fairchild Scholars are not candidates for degree. Nor are they required to perform any services; rather they themselves determine the activities in which they will engage and the projects which they will pursue.
As 1986 U.S. Tax Ct. LEXIS 92">*96 a Fairchild Scholar, petitioner received from Cal Tech a stipend equivalent in amount to the salary and fringe benefits he would have received from Penn had he not left.
Aside from a conversation with a faculty member of Cal Tech during which petitioner expressed an interest in the Fairchild Scholars Program, petitioner made no effort or formal application to be considered for the stipend.
As an economist and a professor, petitioner's work generally consisted of "formulating and analyzing mathematical models of various aspects of economic behavior" and teaching classes. However, while at Cal Tech, his responsibilities were undefined and his days unstructured. Petitioner taught no classes nor did he have any administrative duties. As a Fairchild Scholar, petitioner spent a good deal of time thinking about how he could structure his future research program. In addition, petitioner worked on six papers, lectured on occasion, and established a weekly seminar in economic theory for scholars of economics in the Los Angeles area.
86 T.C. 1275">*1277 Petitioner moved his household, including his wife, a son aged 17, a daughter aged 11, and his dog, to Pasadena, California, from Philadelphia. He1986 U.S. Tax Ct. LEXIS 92">*97 rented his house in Pennsylvania for the 1978-79 academic year and took a 1-year leave of absence from Penn without pay. While in California, petitioner incurred grocery expenses for his household in the amount of $ 3,307 and expenses for meals in restaurants in the amount of $ 910. 2
On his Federal income tax return for 1979, petitioner omitted from income the stipend he received from Cal Tech under the Fairchild program. Respondent's notice of deficiency calculated an increase in petitioner's income of $ 47,006.09 for 1979 attributable to the stipend. 3
ULTIMATE FINDING OF FACT
The money received by petitioner from1986 U.S. Tax Ct. LEXIS 92">*98 Cal Tech as a Fairchild Scholar was a fellowship grant.
OPINION
The initial issue to be decided is whether the stipend received by petitioner as a Fairchild Scholar qualifies as an award fully excludable from gross income under
Gross income does not include amounts received as prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, but only if --
(1) the recipient was selected without any action on his part to enter the contest or proceeding; and
(2) the recipient is not required to render substantial future services as a condition to receiving the prize or award.
86 T.C. 1275">*1278 In the case of an individual, gross income does not include --
(1) any amount received --
* * * *
(B) as a fellowship grant, including the value of contributed services and accommodations; and
(2) any1986 U.S. Tax Ct. LEXIS 92">*99 amount received to cover expenses for --
(A) travel,
(B) research,
(C) clerical help, or
(D) equipment,
However,
Petitioner argues that the stipend is an award and not a fellowship grant. If it is, however, decided that the stipend is a fellowship grant, petitioner then contends that the grant is excludable under
We must first determine if the Fairchild Scholarship should be characterized as a fellowship grant or as an award for tax purposes.
It is of no consequence how the parties characterize the stipend or the name they append to it but instead the reasons for its award. An award excludable under
In characterizing the stipend, it is inconsequential that petitioner was selected on the basis of his past contributions in the field of economics or that his responsibilities as a Fairchild Scholar did not include structured duties.
Having characterized the stipend as a fellowship grant, we must decide if its tax treatment is to be governed by a combination of
Petitioner finds support for his position in the cross-reference in
We do not agree with petitioner's1986 U.S. Tax Ct. LEXIS 92">*102 interpretation of the interaction of
The cross-reference in
As we have discussed previously, awards and fellowship grants have distinct characteristics -- the former being of a retrospective nature, the latter being prospective. The Code reflects this.
Petitioner cites
Petitioner's ultimate argument on this issue1986 U.S. Tax Ct. LEXIS 92">*104 is that
To hold a regulation invalid we must first find it to be an unreasonable implementation of congressional mandate.
The other issue with which we must deal is the deductibility under
There is no question that petitioner's business is that of an economics professor. Respondent does not argue otherwise. Nor is any issue taken with the fact that petitioner was away from his tax home in Pennsylvania in pursuit of this business or that the claimed expenses are ordinary and necessary. See
While there might be some practical appeal to respondent's argument, Congress has dealt with the question of duplication by simply requiring that, in order to deduct any expenses that would otherwise be personal in nature, the taxpayer must incur them while away from home in the pursuit of business. This is based on the assumption that once the taxpayer has a home from which he may be away, many of the expenses incurred while away must, to some degree, be duplicated expenses.
money spent for food and lodging on a business trip is normally in part business expense and in part personal living expense. When we are required to travel for business purposes, the cost of our food and shelter is increased: continuing costs incurred at a permanent place of abode are duplicated, and we are compelled, in addition, to pay higher prices for our food and shelter than we would pay if not traveling. This increased cost is clearly attributable to the exigencies of business. On the other hand, since we must eat and sleep whether or not we are traveling, that portion of the cost of food and lodging while on business travel which would have been incurred even at home is actually a personal living expense.
It would be difficult for a taxpayer to show how much the actual cost of his food and lodging exceeded what the cost would have been had he not been traveling away from home on business. In adopting what is now
[
It is inconsequential whether petitioner purchased his food in a supermarket or a restaurant. Our concerns are (1) whether he incurred expenses while away from home in pursuit of his business, and if so (2) the amount of these expenses. Therefore, to the degree that petitioner has proven that he incurred expenses for food for his own consumption, he may claim a deduction under
Petitioner proved by the production of receipts that the total food expenses for his family for 1979 amounted to $ 4,390. Of this amount, the parties agree that $ 173 is allowable, as it was clearly for food consumed by petitioner while on the campus of Cal Tech. Of the remaining $ 4,217 in food expenses, $ 3,307 was for food purchased at the supermarket and $ 910 was for food purchased in restaurants. Petitioner allocated $ 1,100 of the grocery store purchases (33%) and1986 U.S. Tax Ct. LEXIS 92">*110 $ 455 of the restaurant purchases (50%) as food for his own consumption. Petitioner arrived at the allocation of grocery expenses by a formula based on the proportionate body weights of the members of his family. As petitioner put it at trial, "I tried to think of a formula that made sense, and you can think of a lot of them. Remember, I am an economist, this is partly the game I play. One [way] -- the dumb one, I would say -- is to take four people and divide by four, forgetting I had at that time an 11 year old daughter, that my wife is approximately two-thirds my size, and that I have a son who is a complement to me. * * * The formula that I used was the next simple formula, [to] which I could also object on a lot of grounds, but it also makes a lot of sense, and that is to * * * [allocate] the food [by] the family's weight."
Petitioner's allocation is, to say the least, creative. However, if it proposes to approach a scientific approximation of the amount of food consumed by each member of the household, it is flawed, e.g., it ignores factors such as the 86 T.C. 1275">*1284 relative metabolic rate of each person. 5 Any parent having a teenage child can attest to the fact that a1986 U.S. Tax Ct. LEXIS 92">*111 teenager eats as much as, or more than, the parent regardless of weight.
Of course, the best proof would be to have receipts directly related to petitioner's own food consumption. Understandably, in a situation such as the one before us now, such a requirement would be onerous. Thus, we will make an estimation which we deem best reflects or approximates the true costs involved.
Accordingly,
1. All section references are to the Internal Revenue Code of 1954 as amended and in effect during 1979. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. In addition, petitioner spent $ 173 on food for himself at Cal Tech, the deductibility of which is conceded by respondent.↩
3. The parties agree that the W-2 received from Cal Tech overstated petitioner's 1979 income by $ 8,007.99.↩
4. "Scholarships and Fellowships are not covered by the rules decribed * * * [in
5. Were we to place our judicial imprimatur on a scientific approach of cost allocation, it must not be on one with a flaw that renders it no more precise than the simplest means available.↩
6. It was petitioner's burden to prove to us how much, if any, of the food receipts from the supermarket pertained to dog food purchases. It was also his burden to establish, as is apparently his unstated assumption, that none of the restaurant expenses were for food consumed by his children. He has failed on both of these counts.↩