41 T.C. 32">*33 1963 U.S. Tax Ct. LEXIS 38">*40 Respondent determined deficiencies in petitioners' income tax for the calendar years 1957 and 1958 in the amounts of $ 128.75 and $ 179.99, respectively. For the year 1957 petitioners claim an overpayment of $ 91.35.

The issues for decision are:

(1) Whether petitioners are entitled to a dependency credit exemption for Walter H. Mendel's son Ralph in the year 1957 and for his son Stephen in the year 1958.

(2) Whether petitioners are entitled to deduct moving expenses incurred and paid in the year 1957 in connection with the transfer of Walter H. Mendel by his employer from Newark, N.J., to Richmond, Va., to the extent that the amount so expended exceeded the amount of reimbursement by his employer.

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Petitioners, husband and wife residing in Richmond, Va., filed joint Federal income tax returns for the calendar years 1957 and 1958 with the district director of internal revenue at Richmond, Va.

Walter H. Mendel (hereinafter referred to as petitioner) is a physician specializing in radiology who has been employed since prior to the year 1957 by the U.S. Veterans Administration as a chief of Radiology Service.

1963 U.S. Tax Ct. LEXIS 38">*41 On May 2, 1943, petitioner married Gisela Silberback (hereinafter referred to as Gisela) in Chicago, Ill. Twin boys, Stephen and Ralph, were born of this marriage on December 20, 1947.

Petitioner and Gisela entered into a property settlement and support agreement on December 31, 1953, the terms of which were incorporated into a decree of divorce entered by the Circuit Court of Cook County, Ill., on May 5, 1954. The property settlement and support agreement was amended in July 1954 by agreement of the parties. Under the agreement, as amended, petitioner was required to pay for support of Stephen and Ralph $ 22.50 a week each or $ 45 total and in addition to pay the doctor and dental bills for both the boys. Petitioner was also required to carry three insurance policies on his life for the benefit of the boys.

By order of the Circuit Court of Cook County entered March 7, 1957, petitioner was required to increase the weekly payments commencing February 14, 1957, to $ 27.50 a week for each of the boys or a total of $ 55 a week and for the year 1957 to pay a total of $ 150 ($ 75 for each boy) for a summer day camp. During the year 1957 petitioner pursuant to the terms of the property1963 U.S. Tax Ct. LEXIS 38">*42 settlement agreement, as 41 T.C. 32">*34 amended, paid $ 1,455, including the $ 75 payment for camp, in support payments for each of his sons, Stephen and Ralph, and in addition paid $ 170.11 as medical expenses for the two boys.

During the year 1958, petitioner pursuant to the terms of the property settlement agreement, as amended, paid $ 1,430 in support payments for each of the boys Stephen and Ralph and in addition paid $ 88.92 for medical expenses for the two boys. In addition to the support payments under the agreement and medical expenses, petitioner during 1957 paid the amounts of $ 360 and $ 178.80, respectively, to Union Central Life Insurance Co. and the Veterans Administration for premiums on insurance on his life, and for the year 1958 paid the amounts of $ 390 and $ 178.80, respectively, to the Union Central Life Insurance Co. and the Veterans Administration for premiums on insurance on his life.

Ralph and Stephen have lived with Gisela at all times since her divorce from petitioner in May 1954.

From 1953 to June 1957, petitioner was assigned to the Veterans Administration regional office in Newark, N.J. In June 1957 he was transferred by the Veterans Administration from 1963 U.S. Tax Ct. LEXIS 38">*43 Newark, N.J., to McGuire Veterans Administration Hospital, Richmond, Va. This transfer was made by the Veterans Administration upon request of the director of the McGuire Veterans Administration Hospital at Richmond, Va., and was made in the interest of the Government. Petitioner did not request that this transfer be made.

The travel authorization issued by the Veterans Administration to petitioner on the regular authorized form provided that travel would begin on or about June 14, 1957, and consume 1 day and would be by rail. Petitioner was, in addition, authorized to transport his wife by rail, was allowed per diem in lieu of subsistence of $ 12, and was authorized to ship household goods and personal effects of 7,000 pounds. Under the block entitled "Estimated Cost of Travel" appears one figure of $ 65 and another of $ 594. Petitioner's household effects were moved from Newark to Richmond by a regulated interstate trucking company. Petitioner contacted various firms engaged in transporting household effects in interstate traffic prior to engaging the company which moved his property and found the price to be the same from each of the companies contacted. The weight of the1963 U.S. Tax Ct. LEXIS 38">*44 household goods and personal effects transported for petitioner was only 3,500 pounds and approximately 1,000 pounds of this weight consisted of scientific books. Petitioners did as much of the packing of their own goods as they were able to do and had the trucking company that was transporting the goods do the remainder of the packing. Petitioners spent one night in a hotel upon their arrival in Richmond and the next day 41 T.C. 32">*35 moved to a room at the hospital which was made available to them without charge where they lived until they moved into their own apartment.

In making the move from Newark to Richmond petitioners incurred the following expenses which were paid in 1957:

Petitioner received reimbursement for his expenses of moving from Newark to Richmond from the Veterans Administration in the amount of $ 316. The amount of the reimbursement was determined under the standardized Government travel 1963 U.S. Tax Ct. LEXIS 38">*45 regulations then in effect and the orders of the Veterans Administration.

Petitioners on their income tax returns for the years 1957 and 1958 claimed dependency exemptions for both Stephen and Ralph. Respondent in his notice of deficiency for 1957 denied the exemption claimed for Ralph with the explanation that petitioner had failed to establish that he contributed more than one-half of Ralph's support for the year 1957. For the year 1958 respondent disallowed the exemption claimed for Stephen with a similar explanation. On their income tax return for 1957 petitioner claimed itemized deductions in a total amount of $ 2,068.43. In the statement attached to the notice of deficiency for the year 1957 respondent gave the following explanation with respect to petitioner's moving expenses:

The issue raised in your claim for refund requesting a deduction in the amount of $ 351.35 for the unreimbursed portion of moving expenses has been given careful consideration and it has been determined that no deduction is allowable since moving expenses are nondeductible personal expenses. The exclusion from income of reimbursement received from the employer has been allowed since the transfer1963 U.S. Tax Ct. LEXIS 38">*46 was in the interest of the employer. See Revenue Ruling 54-429, C.B. 1954-2, 53.

In their petition petitioners alleged that they are entitled to a deduction for the year 1957 of $ 312.45 for the unreimbursable portion in their moving expenses from Newark to Richmond and to an overpayment of income tax of $ 91.35.

OPINION

Petitioner offered no evidence to show the total amount expended for the support of either Ralph or Stephen for either the year 1957 or 41 T.C. 32">*36 1958. The substance of petitioner's testimony at the trial was that he had made a diligent effort to obtain information as to the total amount expended for the support of Ralph and Stephen for the years 1957 and 1958 and for other years but that he had not been able to get this information. He testified that he knew of no serious illnesses that either of the boys had during either the year 1957 or 1958, that they attended public schools, that they were dressed modestly when he saw them, and that he could not understand why their support would be in excess of the amount he paid.

Petitioner testified that he did not know the amount of Gisela's income in 1957 and 1958. Petitioner's primary argument is that it is unreasonable1963 U.S. Tax Ct. LEXIS 38">*47 to believe that the support of either Ralph or Stephen for either the year 1957 or 1958 would be in excess of the amount he paid.

Petitioner's situation is a difficult one. The boys lived with Gisela and petitioner did not know the total amount expended for their support. However, this does not relieve petitioner of his burden of proving that he contributed more than one-half of the support of Ralph in 1957 and Stephen in 1958. Gisela was not called as a witness. Whether petitioner felt that he would not obtain the desired information if she were called or whether the expense connected with subpoenaing her deterred his having her testify is not shown. Because of petitioner's failure to prove the total cost of the support of Ralph in 1957 and Stephen in 1958 and to prove that the amount expended by him in their support was more than one-half of their total support, we sustain respondent in the disallowance of the exemption claimed by petitioner for Ralph in 1957 and for Stephen in 1958. Cf. Bernard C. Rivers, 33 T.C. 935">33 T.C. 935 (1960).

Respondent makes no contention that the total amount expended by petitioner of $ 558.99 was not expended in connection1963 U.S. Tax Ct. LEXIS 38">*48 with petitioner's move from Newark to Richmond but in fact has stipulated that these expenses were incurred in "making the move from Newark to Richmond." While respondent did not agree with petitioner that the amount of their moving expenses was reasonable, the evidence offered by petitioner clearly establishes that it was. Petitioner's explanation of why reasonable and necessary expenses of his move exceeded the allowance he received from the Veterans Administration is that costs in connection with transporting and handling of personal effects had increased shortly prior to his move whereas the allowance for such expenses by the Veterans Administration was not increased until a time somewhat subsequent to his transfer. This explanation was a statement made by petitioner in his argument and has not been proven as a fact. However, we do not consider the reason why the allowance was less than petitioner's actual expenses to be crucial since the evidence 41 T.C. 32">*37 does show that the amounts expended by petitioner were reasonable and were necessary in order to make the move and transport his household effects, his scientific books, and himself and his wife. It is clear from the evidence1963 U.S. Tax Ct. LEXIS 38">*49 that petitioner did not request the transfer and the transfer was made solely for the convenience of the Veterans Administration. In his opening statement at the trial petitioner stated that it was necessary for him to accept the transfer in order to continue his employment with the Veterans Administration and that he did not desire the transfer. It is respondent's position that even though petitioner's retention of his employment with the Veterans Administration depended on his accepting the transfer from Newark to Richmond, nevertheless the expenses of moving his household effects and wife from Newark to Richmond were personal expenditures resulting from his desire to have his household effects and his wife in Richmond with him. Respondent relies on Darrell Spear Courtney, 32 T.C. 334">32 T.C. 334 (1959); H. Willis Nichols, Jr., 13 T.C. 916">13 T.C. 916 (1949); Light v. Commissioner, 310 F.2d 716 (C.A. 5, 1962), affirming a Memorandum Opinion of this Court; York v. Commissioner, 160 F.2d 385 (C.A.D.C., 1947), affirming a Memorandum Opinion of this Court; and cases of similar1963 U.S. Tax Ct. LEXIS 38">*50 import. Each of these cases holds that the expenses of transporting household effects and a taxpayer's family from one post of duty to another are personal and not business expenses. In 13 T.C. 916">H. Willis Nichols, Jr., supra, it is pointed out that such expenses have nothing to do with the performance of the official duties of a taxpayer but result in a source of personal satisfaction and personal convenience in having his family living at his post of duty. Respondent calls attention to the fact that he has not required that petitioner include in his income the $ 316 reimbursed to him by the Veterans Administration and in support of this action cites Rev. Rul. 54-429, 1954-2 C.B. 53. In John E. Cavanagh, 36 T.C. 300">36 T.C. 300 (1961), we quoted the portion of Rev. Rul. 54-429, supra, which states:

Accordingly, it is concluded that (1) amounts received by an employee from his employer representing allowances of reimbursements for moving himself, his immediate family, household goods and personal effects, in case of a transfer in the interest of his employer, 1963 U.S. Tax Ct. LEXIS 38">*51 from one official station to another for permanent duty, do not represent compensation within the meaning of section 22(a) of the Code, and are not includible in the gross income of the employee if the total amount of the reimbursement or allowance is expended for such purposes * * *

In 36 T.C. 300">John E. Cavanagh, supra, we stated that "With the exception hereinafter discussed, we think the above ruling is sound and has persuasive effect here." No issue was involved in 36 T.C. 300">John E. Cavanagh, supra, with respect to cost for moving household effects in excess of the amount paid by the employer.

41 T.C. 32">*38 It has been held in numerous cases that amounts paid by an employer in discharge of personal expenses of an employee are includable in the gross income of the employee under the definition of gross income contained in section 22(a) of the Internal Revenue Code of 1939 and section 61(a) of the Internal Revenue Code of 1954. See Woodall v. United States, 255 F.2d 370, 372 (C.A. 10, 1958), and cases there cited, with particular reference to footnote 2 in which attention is directed to the fact that although1963 U.S. Tax Ct. LEXIS 38">*52 the definition of gross income was simplified in the Internal Revenue Code of 1954 there was no change intended in the all inclusive effect of the statute citing Commissioner v. Glenshaw Glass Co., 348 U.S. 426">348 U.S. 426. ¹ We believe that a corollary to the soundness and persuasive effectiveness of Rev. Rul. 54-429 which we accepted in 36 T.C. 300">John E. Cavanagh, supra, is an inherent assumption in that ruling that reasonable amounts expended by a permanent employee in moving his family and personal effects in a transfer from one permanent post of duty to another are not personal expenses. If such amounts constituted personal expenses, amounts received in reimbursement therefor would be includable in the income of the taxpayer. Light v. Commissioner, supra.Cf. Willis B. Ferebee, 39 T.C. 801">39 T.C. 801 (1963). If amounts expended by a taxpayer in moving from one permanent post of duty to another are not personal expenses, they are for the purpose of the taxpayer's business as an employee since the cause of the move is business requirements. 1963 U.S. Tax Ct. LEXIS 38">*53 Ordinary and necessary business expenses are deductible by an employee who itemizes his deductions on his income tax return. Of course business expenses for which reimbursements are received from the employer cannot be deducted unless the amount of the reimbursements has been included in the taxpayer's income. The clear inference from our holding in 36 T.C. 300">John E. Cavanagh, supra, is that the entire amount of the expenses paid by an employee in moving from one permanent duty station to another is deductible to the extent that the amount expended is ordinary and necessary to accomplish the move and that this may be accomplished either by not including the reimbursed amount in income or by including the reimbursed amount in income and deducting the total amount expended. In the instant case it appears from the record that petitioner has not included the $ 316 which he received from the Veterans Administration as reimbursement for his moving expenses in his 1957 income as reported.

1963 U.S. Tax Ct. LEXIS 38">*54 We hold that petitioner is entitled to deduct in the year 1957 the amount of $ 242.99, which represents the amount of his ordinary and necessary expenses of moving his household effects, himself, and his 41 T.C. 32">*39 wife from Newark, N.J., to Richmond, Va., which were not reimbursed to him by the Veterans Administration.

Decision will be entered under Rule 50.

Tietjens, J., dissenting: I disagree with the majority on the moving expense issue. The question is simply whether such expenses are deductible. There is no question here about whether reimbursement of an employee by an employer for the expenses of moving are or are not includable in income. The conclusion of the majority, as I see it, flies in the face of our decision in H. Willis Nichols, Jr., 13 T.C. 916">13 T.C. 916, and what the Court of Appeals said in Woodall v. United States, 255 F.2d 370, 373, in holding such expenditures not to be allowable as deductions. I would follow those decisions.

Drennen, J., dissenting: With all due respect I think the majority opinion in this case will simply add more confusion to this already confused problem1963 U.S. Tax Ct. LEXIS 38">*55 of the taxability of reimbursed, and the deductibility of unreimbursed, moving expenses of employees.

The opinion makes no finding that the unreimbursed portion of petitioner's moving expense was an ordinary and necessary business expense of the taxpayer-employee, except by an assumption, based on our decision in John E. Cavanagh, 36 T.C. 300">36 T.C. 300 (1961), that because the taxpayer there was not required to include in his income reimbursements of moving expenses they could not be personal living expenses and therefore must be expenses of taxpayer's business as an employee. But this assumption flies directly in the face of H. Willis Nichols, Jr., 13 T.C. 916">13 T.C. 916 (1949), and the other cases cited in the majority opinion, which hold that the expenses of moving a taxpayer's family and household effects from one post of duty to another are personal and not business expenses, and are therefore not deductible.

Furthermore, I do not think the conclusion reached in Cavanagh requires or necessarily supports this assumption. The issue in Cavanagh was the includability of reimbursed expenses in taxpayer's income. We found that the1963 U.S. Tax Ct. LEXIS 38">*56 expenses involved were incurred for the convenience of the employer and being of no benefit to the employee were expenses of the employer and not income to the employee. If the expenses assumed by an employer, either by direct payment thereof or by reimbursement of the employee, in moving an employee, his family, and personal effects from one post of duty to another, are of 41 T.C. 32">*40 no economic or financial benefit to the employee and are not compensatory in nature, but are for the convenience and benefit of the employer, I see no reason why they need be included in the income of the employee. This is a question that may have to be decided on the facts of each case. But I do not think it necessarily follows that the employee may deduct his unreimbursed expenses of moving himself, his family, and his personal effects from one post of duty to another except to the extent that he can show independently that such expenditures are either an ordinary and necessary expense of his business as an employee so as to be deductible under section 162(a) of the Code, or are deductible under some other section of the Code. Personal living expenses, which these would appear to be unless proven1963 U.S. Tax Ct. LEXIS 38">*57 otherwise, are specifically made not deductible under section 262 of the Code.