Petitioner was employed by the Boeing Co. in Seattle, Wash. In June 1964 Boeing assigned petitioner to Los Angeles for what it told him would be a 1-year period. Petitioner moved his wife and three children to the Los Angeles area. In addition, he rented out his house in Seattle for a year and brought a portion of his furniture with him to the Los Angeles area. In March 1965 Boeing made Los Angeles petitioner's permanent station of employment.
1. While he was in the Los Angeles area in 1964, petitioner was in temporary status and therefore "away from home"; accordingly, he was entitled to deduct meal and lodging expenses during that period under
2. Automobile expenses claimed by petitioner in excess of amounts allowed by the Commissioner were not substantiated and are not deductible as ordinary and necessary business expenses.
53 T.C. 269">*270 The Commissioner determined a deficiency of $ 582.33 in petitioners' income tax for 1964. Two questions are presented: (1) Whether certain expenditures made by petitioner, Emil J. Michaels, for 1969 U.S. Tax Ct. LEXIS 21">*22 meals and lodging during that year were made while he was "away from home" so as to be deductible as "traveling expenses * * * while away from home" within
FINDINGS OF FACT
The parties have stipulated certain facts, which, together with the attached exhibits, are incorporated herein by this reference.
Petitioners Emil J. and Delores E. Michaels, husband and wife, resided in Seattle, Wash., and Long Beach, Calif., in 1964. They have since separated and at the time of the trial herein they were living apart. At the time the petition in this case was filed, Emil resided in Los Angeles County, Calif., and Delores resided in Orange County, Calif. Petitioners filed a joint Federal income tax return for the year 1964 with the district director of internal revenue in Los Angeles, Calif. Delores E. Michaels is a party to this proceeding solely by virtue of the joint return filed for 1964, and the term "petitioner" will hereinafter refer exclusively to Emil J. Michaels.
As of the time of 1969 U.S. Tax Ct. LEXIS 21">*23 the trial herein, petitioner had been employed by the Boeing Co. (Boeing) since 1950. From 1959 until 1964 he was employed as a cost analyst in Seattle, Wash., and during that time he owned a house in Seattle in which he and his family resided. As a cost analyst, petitioner was required to travel to various locations throughout the United States to audit and analyze the records of Boeing's suppliers. Ordinarily, petitioner's wife and children remained in their Seattle home while he was away. Until June 1964, the longest period for which petitioner was required to be away from home was approximately 5 weeks.
Boeing had a great number of suppliers in the Los Angeles area. In order to eliminate many trips back and forth between Los Angeles and Seattle, Boeing asked petitioner in 1964 to go to Los Angeles for a longer period of time than he had previously been away from Seattle. 53 T.C. 269">*271 He was told that he would be assigned to Los Angeles for approximately 1 year.
Petitioner rented out his home in Seattle for 1 year, and in June 1964 he, his wife, and three children traveled to Los Angeles by automobile. He rented a trailer for $ 125, removed a portion of the furniture from the house in 1969 U.S. Tax Ct. LEXIS 21">*24 Seattle (including a refrigerator, a kitchen table and chairs, most of the kitchen utensils, a davenport, chairs for the living room, two children's beds, and a chest of drawers), and brought it with them in the trailer to Los Angeles. The trip to Los Angeles took 4 days. During that time petitioner spent $ 50 per day for food and lodging for himself and his family.
During their first 25 days in the Los Angeles area, petitioner and his family stayed in a motel in Long Beach. They then rented an unfurnished house in Long Beach. They furnished the house with the furniture they had brought with them and with two beds which they purchased.
Until sometime in March 1965 Boeing treated petitioner's presence in the Los Angeles area as temporary only and regarded Seattle as his permanent station. In March 1965, Boeing informed petitioner that it wished to establish a permanent office for cost analysis in the Los Angeles area, and petitioner returned to Seattle to discuss the plan. He was awarded a promotion and told to return to Los Angeles on a permanent basis to hire and train employees to staff an office there. Shortly thereafter, petitioner purchased a house in the Los Angeles area, 1969 U.S. Tax Ct. LEXIS 21">*25 and Boeing had the rest of his furniture in Seattle shipped there. Petitioner sold his house in Seattle in January 1968.
In 1964 petitioner received $ 2,065.75 from Boeing to cover per diem living expenses in Long Beach. He spent no less than this amount for meals and lodging during that time.
During 1964 petitioner used two automobiles for business as well as for personal purposes, and he received $ 894.26 from Boeing as reimbursement for his automobile expenses. However, he kept no records which would establish the amount of business use.
In their joint Federal income tax return for 1964, petitioners did not include any part of the $ 2,065.75 per diem allowance in gross income. On an attached schedule, they listed $ 2,332.03 in automobile expenses incurred with respect to two cars. The expenses included depreciation, gas, oil and grease, repairs and maintenance, and insurance. From the $ 2,232.03 was subtracted the $ 894.26 reimbursement received from Boeing. Petitioners deducted the difference, $ 1,437.77, as "Employee business expense."
In his notice of deficiency, the Commissioner, in addition to other adjustments not here in issue added the $ 2,065.75 per diem allowance 53 T.C. 269">*272 to 1969 U.S. Tax Ct. LEXIS 21">*26 petitioner's income and disallowed $ 1,070.20 of the $ 1,437.77 claimed as automobile expenses. In addition, the Commissioner allowed an unclaimed deduction of $ 250 for moving expenses.
The parties have agreed that if petitioner was "away from home" within the meaning of
OPINION
We turn first to the question of the deductibility of petitioner's expenditures for meals and lodging in the Los Angeles area in 1964.
(a) In General. -- There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including -- * * * * (2) traveling expenses (including amounts expended for meals and lodging 1969 U.S. Tax Ct. LEXIS 21">*27 other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; * * *
In
Three conditions must * * * be satisfied before a traveling expense deduction may be made * * *:
(1) The expense must be a reasonable and necessary traveling expense * * *
(2) The expense must be incurred "while away from home."
(3) The expense must be incurred in pursuit of business. This means that there must be a direct connection between the expenditure and the carrying on of the trade or business of the taxpayer or of his employer. * * *
The parties have stipulated that petitioner's expenditures were "reasonable and necessary" to the extent of $ 2,065.75. Moreover, it is not disputed that the petitioner's expenses were "incurred in pursuit of business."
The Commissioner contends that petitioner was not "away from home." Because petitioner was assigned to the Los Angeles area for a "substantially long" or "indefinite" period, the Commissioner argues, Seattle was no longer his "home" after June 1964. Therefore, his argument concludes, petitioner's meal and lodging expenses 1969 U.S. Tax Ct. LEXIS 21">*28 are not deductible 53 T.C. 269">*273 under
We have consistently held that "home" in
When petitioner was assigned to the Los Angeles area, he was told that his assignment was for only 1 year. Furthermore, at the time he was assigned, Boeing did not have a permanent 1969 U.S. Tax Ct. LEXIS 21">*29 office for cost analysis in Los Angeles. Not until March 1965, when petitioner was recalled to Seattle, did petitioner have reason to know that his employment in Los Angeles was other than temporary. Moreover, petitioner's decision not to sell his house in Seattle and to leave some of his furniture there suggests to us that he believed that his stay in Los Angeles would be brief and that he would be returning to Seattle. A period of 1 year seems to us both sufficiently lengthy to explain petitioner's decision to bring his family to the Los Angeles area and sufficiently brief to justify his decision to retain his house in Seattle.
In
There are, however, 1969 U.S. Tax Ct. LEXIS 21">*30 several cases, not urged upon us by the Commissioner which emphasize that
53 T.C. 269">*274 there is no duplication unless the taxpayer maintains an abode at which he incurs living expenses in addition to those which he incurs while traveling. And when duplication does exist, it constitutes a valid reason for attributing living expenses to business necessity only to the extent of the duplication. It follows that the
The second justification for treating the cost of meals 1969 U.S. Tax Ct. LEXIS 21">*31 and lodging on business trips as business expense is the assumption that food and shelter cost more while traveling. This justification also supports a reading of the Section as requiring maintenance of a substantial permanent abode at which taxpayer could live at a lesser expense if not required to travel. If a taxpayer has no such home, and obtains his food and shelter at public restaurants and lodgings even if not traveling, the increase in the cost of these items attributable to travel is at least substantially less. n7
For these reasons it has generally been held that the taxpayer cannot be "away from home" * * * unless he has a "home" * * *. And we think the better reasoned authority holds that a taxpayer has a "home" for this purpose only when it appears that he has incurred substantial continuing living expenses at a permanent place of residence. n9 [Footnotes omitted.]
In the context of this case, we find this distinction significant. The lease on the house in Seattle was for only 1 year. The petitioner left a portion of his own furniture in the house. As far as the taxpayer knew in 1964, he and his family would be returning to Seattle sometime in mid-1965. In this setting we regard retention of the house in Seattle as persuasive evidence of the taxpayer's intention to return to it in 1965. We find that he did have a "home" to which to return. Cf.
Nor do we find here that petitioner was able to avoid completely duplication of his living expenses. While it is true that he 1969 U.S. Tax Ct. LEXIS 21">*33 had rented his Seattle house, the return in evidence shows that the rent received 53 T.C. 269">*275 was $ 875 as against $ 1,945.05 in expenses related thereto. Although the Commissioner disallowed $ 117.06 of the claimed $ 1,070.05 rental loss, there nevertheless remained a substantial loss of $ 952.99, which certainly suggests an added cost to petitioner's California living expenses. Moreover, while the absence of duplicated living expenses is an important factor to be considered, we think it should not be determinative of the question of deductibility, cf.
Next, we reach the issue of the deductibility of petitioner's unreimbursed automobile expenditures in excess of the amount allowed by the Commissioner. The Commissioner has allowed petitioner to deduct automobile expenses to the extent of $ 894.26, the amount of the reimbursement from Boeing. In addition, he has allowed petitioner 1969 U.S. Tax Ct. LEXIS 21">*34 to deduct $ 367.57 as unreimbursed expenses.
Petitioner has the burden of proving to what extent his automobile expenses were incurred for business and personal purposes. Cf.
