Opinion
Docket No. 2386-69.
1970-03-19
GUY R. AND RITA R. MOTTO, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
Guy R. Motto, pro se. Bernard J. Boyle and Wayne I. Chertow, for the respondent.
Guy R. Motto, pro se. Bernard J. Boyle and Wayne I. Chertow, for the respondent.
Held, fee expended to secure employment is deductible as an ordinary and necessary business expense within the meaning of sec. 162, I.R.C. 1954. David J. Primuth, 54 T.C. 374 (1970).
STERRETT, Judge:
The Commissioner determined a deficiency of $598.79 in petitioners' Federal income tax for the taxable year 1967. The only issue for decision is whether petitioner can deduct $2,721.97 under section 162 or 212, I.R.C. 1954,
or whether such amount is a nondeductible expense under section 262.
All statutory references are to the Internal Revenue Code of 1954 unless otherwise specified.
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation and exhibits attached thereto are incorporated herein by this reference.
Guy R. and Rita R. Motto resided at Indianapolis, Inc., at the time the petition herein was filed. They filed their 1967 Federal income tax return with the district director of internal revenue, Indianapolis, Ind. Since the claimed deduction involved herein relates solely to an expense incurred by Guy R. Motto, the designation ‘petitioner’ will hereinafter refer solely to him.
Petitioner was employed prior to and until November 1967 as an engineer in Dayton, Ohio. In 1966 petitioner began to look for a new job because he felt his then employer was not making full use of his potential. In addition, petitioner desired a position which would yield a greater income and a more challenging and responsible career.
In furtherance of this goal, petitioner entered into an agreement with Frederick Chusid & Co. (Chusid) entitled ‘Top Level Executive Assessment and Sponsored Career Advancement Program.’ Chusid designates itself as ‘professional career consultants' and offers a variety of programs and services to its clients with the aim of securing for them ‘the most meaningful career objectives and rewards fully commensurate with * * * (their) abilities.’
The total fee paid to Chusid was $2,375, beginning with an initial retainer of $875 paid on March 11, 1967, and followed thereafter with 12 monthly payments of $133.12 plus interest on the unpaid balance of $1,500. Petitioner paid a total of $2,322.61 in 1967 and $399.36 in 1968, which included certain out-of-pocket expenses for printing, mailing, postage, and telephone costs, all of which he deducted on his 1967 income tax return. This fee was payable in any and all events after petitioner was accepted into the program.
Pursuant to the agreement, Chusid helped to prepare a letter to be sent by petitioner to selected friends and executives of companies in fields of interest to him. In addition Chusid prepared a resume of petitioner's qualifications along with a covering letter of its own. Chusid sent these materials to numerous prospective employers, selected by it and by petitioner.
During September and October of 1967 petitioner received a great number of responses. In November of 1967 as a result of these efforts by Chusid on his behalf, petitioner obtained and commenced employment with Guepel Architects and Engineers, a division of Guepel Construction Co., Indianapolis, Ind., as section head of the mechanical section.
The deficiency herein arises from the disallowance of petitioner's deduction in 1967 of the aforementioned total expenditures of $2,721.97, which the Commissioner determined was a ‘nondeductible personal expense under section 262 of the Internal Revenue Code of 1954.’
OPINION
The petitioner expended $2,322.61 in 1967 and $399.36 in 1968, as employment fees and related expenses, in order to obtain new employment. He deducted the sum of these amounts on his income tax return for the year ended December 31, 1967. We must, now, determine whether the respondent has erred in disallowing this deduction.
Section 162(a) provides as follows:
SEC. 162. TRADE OR BUSINESS EXPENSES.
(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 * * *
We hold that the above-noted expenditures were incurred by the petitioner in carrying on his trade or business of being an engineer.
As to the amount expended in 1967, petitioner was entitled to a deduction under section 162(a). This case is indistinguishable from our recent court-reviewed opinion in David J. Primuth, 54 T.C. 374, (1970). In fact, the efforts of the same employment service, i.e., Chusid, were involved in both cases and, as it happened to develop, its efforts were successful. The sole difference, between that case and the instant one, resides in the fact that Primuth was in the trade or business of being a corporate executive and the petitioner, herein, is in the trade or business of being an engineer. See David J. Primuth, supra at 377, for the rationale underlying this statement. We do not find any merit in this factual deviation
and, accordingly, incorporate our opinion in David J. Primuth, supra, herein, by this reference
The fact that petitioner is an engineer, if anything, supports our decision. Education, training, and experience would seem to bind the engineer to his profession, causing a more demonstrable continuity in carrying on his trade or business.
Concerning the amount of $399.36, expended by the petitioner in 1968, we must find for the respondent. While both expenditures were part and parcel of the same transaction, petitioner, however, made actual payment of the portion of his fee represented by the $399.36 to Chusid in 1968. Assuming as we do that the petitioner was a cash basis taxpayer,
the expenditure would seem to have been more properly deductible on his income tax return for the taxable year in which payment was made. Of course, since that year is not before us, we lack jurisdiction to determine the matter. We do not, however, leave petitioner without remedy; he may file a claim for refund within the time allowed by section 6511(a).
Nothing to the contrary appears in the record of this case.
Reviewed by the Court.
Decision will be entered under Rule 50.
TIETJENS, J., concurring: I concur only because I am bound by the result in David J. Primuth, 54 T.C. 374. Otherwise, my heart and mind are with the dissent in Primuth.
DRENNEN, WHITHEY, SCOTT, and HENRY, JJ., agree with this concurring opinion.
TANNENWALD, J., concurring:
I agree with the majority for the reasons set forth in my concurring opinion in David J. Primuth, 54 T.C. 374.
DOP