For the 45 years that this provision has been on the books in substantially its present form the Commissioner has sought to apply a rule of thumb which, in general, has found favor with the Tax Court. See, e.g., Al J. Smith, 1960, 33 T.C. 861; Louis Drill, 1947, 8 T.C. 902. Some other courts have been critical.
Other Courts have not. Mortrud v. Commissioner, 44 T.C. 208 (1965); Armstrong v. Commissioner, 43 T.C. 733 (1965); Smith v. Commissioner, 33 T.C. 861 (1960); Winn v. Commissioner, 32 T.C. 220 (1959); Herrin v. Commissioner, 28 T.C. 1303 (1957); Osteen v. Commissioner, 14 T.C. 1261 (1950). However, in Bagley v. Commissioner, 46 T.C. 176 (1966) the Tax Court reconsidered its prior decisions and allowed a deduction for expense of meals incurred on business trips which did not last overnight.
In disallowing the deduction, the Court stated that the applicable rule 'denies the allowance of expenses and losses where such allowance would be contrary to well-established public policies.' The Government also cites in this connection the case of Smith v. Commissioner, 1960, 33 T.C. 861. That case involved a controversy over a tax deficiency assessed against the taxpayer. The taxpayer was engaged in the food brokerage business in Mississippi.
This Court has considered, on many occasions, whether or not an expense qualified as an ordinary and necessary business expense under section 162. See, e.g., Jordan v. Commissioner, 60 T.C. 770 (1973) (lobbying expense allowed); Smith v. Commissioner, 33 T.C. 861 (1960) (meal expense for guest but not taxpayer allowed); Walliser v. Commissioner, supra (traveling expense disallowed). To qualify as an allowable deduction under section 162 (a) an item must (1) be paid or incurred during the taxable year; (2) be for carrying on any trade or business; (3) be an expense; (4) be a necessary expense; and (5) be an ordinary expense.
This Court has considered on many occasions whether or not an expense qualified as an ordinary and necessary business expense under section 162. See e.g., Jordan v. Commissioner, 60 T.C. 770 (1973) (lobbying expense allowed); Smith v. Commissioner, 33 T.C. 861 (1960) (meal expense for guest but not taxpayer allowed); Walliser v. Commissioner, supra, (traveling expense disallowed). To qualify as an allowable deduction under section 162(a) an item must (1) be paid or incurred during the taxable year; (2) be for carrying on any trade or business; (3) be an expense; (4) be a necessary expense; and (5) be an ordinary expense.
Respondent, on the other hand, urges us to reject the rationale of Hanson and again reiterate our long-standing approval of his overnight rule in denying claimed deductions for the cost of meals. See and compare Fred Marion Osteen, 14 T.C. 1261 (1950); Sam J. Herrin, 28 T.C. 1303 (1957); Joseph M. Winn, 32 T.C. 220 (1959); Al J. Smith, 33 T.C. 861 (1960); and Allan L. Hanson, 35 T.C. 413, 417 (1960). It is quite apparent that the overnight rule has had a stormy past.
However, under provisions of the Internal Revenue Code of 1939, similar to section 162 applicable to the year 1960, we have held that costs of meals for a taxpayer and for member s of his family, not constituting travel expenses while away from home, are not deductible. Al J. Smith, 33 T.C. 861, 867 (1960y, and Richard A. Sutter, 21 T.C. 170 (1953). Since petitioner has not established that the amount disallowed by respondent represented an amount other than meals consumed by petitioner and his personal friends and members of his family, or that in each instance the amount differed from or exceeded that which he would have expended for personal purposes, respondent is sustained in his disallowance of the amount of $511.37 of the amounts claimed to be deductible by petitioner for expenditures in restaurants and similar establishments in Indianapolis, Ind. The vague testimony of petitioner as to costs of groceries for meals for himself is unpersuasive as to what petitioner's personal expenses in Indianapolis for weekend meals for himself, his personal friends, and family might have been.
However, the amount spent for meals constitutes nondeductible personal expense and not expense incurred while ‘away from home’ within the meaning of section 162(a)(2) of the Code and the regulations. See Al J. Smith, 33 T.C. 861, and cases cited therein. Decision will be entered under Rule 50.
Respondent's application of the overnight rule as a test for the allowability of meal expenses has been upheld in many decisions of this Court. See Fred Marion Osteen, 14 T.C. 1261; Sam J. Herrin, 28 T.C. 1303; Al J. Smith, 33 T.C. 861. Rev. Rul. 54-497, 1954-2 C.B. 75; Rev. Rul. 56-508, 1956-2 C.B. 126.