Opinion
Docket No. 3156-69.
1970-02-25
WALTER P. & Joan M. STRICKER, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
Walter P. Stricker, pro se. J. Edward Friedland, for the respondent.
Walter P. Stricker, pro se. J. Edward Friedland, for the respondent.
Held, on the facts, an allowance for living expenses which petitioner received from his employer while he was on assignment away from his regular place of employment is not deductible as traveling expenses under sec. 162(a), I.R.C. 1954, because petitioner was not ‘away from home.’
TIETJENS, Judge:
The Commissioner determined a deficiency of $403.38 in petitioners' 1967 income tax.
We must decide whether petitioner, Walter P. Stricker, may deduct certain expenses of travel, meals, and lodging as paid or incurred by him during the taxable year ‘while away from home in the pursuit of a trade or business,’ within the meaning of section 162(a)(2), I.R.C. 1954.
All statutory references are to the Internal Revenue Code of 1954 unless otherwise specified.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Walter P. Stricker (petitioner) and Joan M. Stricker, husband and wife, resided in Stow, Ohio, at the time they filed their petition herein. They filed their joint income tax return for the calendar year 1967 with the district director of internal revenue, Cleveland, Ohio.
On February 26, 1965, the Boeing Co., Airplane Division, Renton, Wash. (Boeing), and Goodyear Aerospace Corp., Akron, Ohio, and Phoenix, Ariz., a division of Goodyear Tire & Rubber Co. (GAC) entered into an agreement referred to as the Engineering Assistance Program. Under this agreement GAC contracted to furnish to Boeing the services of certain of its engineering personnel for a period of ‘approximately six months commencing on or about March 15, 1965 and ending on or about September 17, 1965, subject however to Boeing's right to terminate at any time.’ The services were to be furnished in the King County, Wash., vicinity. This agreement was extended on separate occasions to June 15, 1966, June 31 (sic), 1967, and to on or about June 1, 1968.
The agreement was a profitable one for GAC and was an important factor in Boeing's selection of GAC as a major subcontractor on the Boeing 707, 720, and 747 airplanes.
On March 10, 1965, petitioner, an employee of GAC, entered into an agreement with GAC for assignment to Boeing ‘to perform services for a period of six (6) months under * * * (the Engineering Assistance Program).’ Under the terms of this agreement petitioner was to depart from Akron on March 15, 1965, and report for work at Boeing on March 22, 1965. He agreed to remain on the assignment at least 6 months except at the request and direction of GAC. Petitioner was to be given an allowance for full expenses of travel to the site and return to Akron, including meals, lodging, and transportation for himself only, and was to receive as well a per diem living allowance upon his arrival at the site. The agreement also provided for a return trip by air to Akron after 3 months for the purpose of transporting his family to the site or for the purpose of visiting his immediate family. Transportation or travel expenses for his family would not be paid.
Petitioner and one A. K. Johnson, a fellow employee, traveled by automobile to Seattle, Wash., to report for work at Boeing. The two employees found an apartment which they shared for the first 3 months of the assignment. During this period petitioner had no car and ate all of his meals in restaurants.
At the end of the initial 3-month period petitioner returned to Akron for the purpose of transporting his family to Seattle. They returned in the family station wagon. Petitioner's travel expenses on the trip to and return from Akron were paid by GAC. Petitioner paid the travel expenses of his family on the trip to Seattle. Petitioner intended to stay in Seattle with his family for the remaining 3 months of his assignment as a ‘business-vacation’ for himself and his family. His children would be on vacation from school during this period. Because of the anticipated short stay in Seattle, petitioner rented a two-bedroom apartment, putting his four children— a daughter, 16; twin boys, 12; and another boy, 3— in one bedroom.
During the first week in July 1965, GAC supervisory personnel traveled to Seattle for the purpose of extending the employees' assignments to Boeing for another 6 months. About the time of his discussions with such personnel, petitioner received a letter, dated July 9, 1965, from S. J. Pipitone, manager of GAC's Space Systems & Analytics Division, which provided in part:
As you have probably heard, Boeing has requested that the assignments of GAC personnel be extended through mid-March 1966. Since this is a profitable program involving an important customer I'm writing to ask if you are willing to stay on for the additional length of time. We are aware that this change may present new problems for you and have taken steps toward making the assignment as attractive as possible. For example, since extension through mid-March would create an awkward school problem GAC has requested that Boeing consider extension to June 1966 for those who so desire. Consideration is also being given to allowance for two additional trips to Akron. In the event that you have difficulty arranging time away from your job for vacation, GAC will probably pay you for any vacation not taken. We prefer not to postpone vacations until next year, however.
I hope you are enjoying your assignment with Boeing and am sure the experience will be beneficial to you during future work in Akron. The information I have received thus far indicates that Boeing has a high regard for your work and has called upon you for a considerable amount of overtime. We need you assistance to maintain the fine record which GAC's Boeing group has compiled thus far.
I will be happy to answer any questions you have regarding this extended assignment and would appreciate an indication from you as soon as possible concerning your acceptance so that we can proceed with detailed planning and make the best possible arrangements.
On July 20, 1965, petitioner entered into an agreement with GAC extending his assignment to Boeing for an additional 9 months to approximately June 18, 1966. Petitioner requested the extension for 9 months, so that his children would be able to complete a full year of school before returning to Akron. Under this contract petitioner was to receive a living allowance of $10 a day, $5 a day when on vacation, and was to be permitted two round trips to Akron. It was verbally agreed that petitioner could combine these trips and that he would be allowed $600 toward the expenses of taking his whole family back to Akron for one trip.
By letter dated July 28, 1965, petitioner responded to S. J. Pipitone's letter of July 9:
Sorry for not answering your letter sooner, but due to the proximity of Mr. Ravenscraft's visit to Seattle I did not think an answer would reach you in time.
I had an interview with Mr. Ravenscraft for the purpose of extending my contract here at Boeing. As you probably know, I have signed an extension for an additional nine months, however, I did this reluctantly and without the privilege of first discussing the matter with you or someone else from our division. As you mentioned in your letter, two additional trips were offered for the purpose of returning to Akron. Mr. Ravenscraft has verbally agreed to letting my wife and I make one trip instead of the two for myself. Since my family as well as myself had no idea of staying on here an additional nine months, this has caused us considerable inconvenience. Some of this inconvenience (sic) could be rectified if my family and I could make this one round trip. I have made preliminary inquiries as to how much this would cost. If we would make this trip during the week (on vacation time) and take advantage of the family plan my entire family could make the round trip for $691.64. I do not believe that this price is excessive under the circumstances, and certainly is not much more than the two individual trips taken by myself on weekends. Any consideration that you could offer in this matter would certainly be appreciated by myself and family.
The 707-820 project that Johnson and myself have been working on has been stopped. We are presently working on the 707-620. Work on this project was started and stopped before we came out here. The 707-620 is also a stretched version of the 320 but requires considerably less re-design than the 820. Boeing's market analysis group determined that for the present time at least, the 620 offered better sales possibilities. We are no longer working overtime on this project, however, this could resume at any time.
I am enjoying my work here at Boeing and I have gained valuable experience which I am sure will prove beneficial.
Petitioner and his family returned to Akron to collect winter clothing, children's toys, bicycles, etc., and to winterize his house by putting up storm windows and making further arrangements to have the house taken care of. Then they returned to Seattle.
Petitioner and his family continued to tolerate the ‘almost near divorce conditions' of living in a two-bedroom apartment for another 9 months. He did not anticipate that his assignment to Boeing would be extended beyond this period.
Petitioner made plans to enroll his children in Seattle schools. Arrangements were made with family doctors, dentists, etc., in Seattle.
In February 1966, petitioner received the following letter dated February 2, from D. W. Brown, manager, Engineering Administration, GAC:
You have been at Boeing quite a while and you no doubt believe this is a long time to be away from your job here in Akron. But whether you realize it or not, doing your job at Boeing has boosted Goodyear's image and has resulted in some new business with much more expected by Sales.
In fact, you've done such a good job and Boeing is so satisfied that GAC has been asked to have all of you extend your assignments to the end of 1966. You know Boeing has the work.
This extension has been discussed at length by Jim Kelley, Ralph Ravenscraft, Joe Pipitone, and Mr. Brittenham. All agreed that for your personal welfare, from Engineering's standpoint, and for the good of the Company, assignments should be extended to a date which would allow you to take your vacations and yet get home in time to get your children into school, about the first week in September.
I'm confident you will be willing to go through another summer in the great Northwest and accept the extended assignment until sometime late in August, beyond your present date of June 18, 1966. Extending only until August will not carry with it an additional trip home.
It is hoped that you will look favorably on this request and agree to the extended assignment. Please let me know your decision as soon as possible in order to advise Boeing and work out the details with you.
Petitioner responded to this letter by letter dated February 4, 1966:
I will accept the extended assignment. However, I do not believe the contract should be extended beyond August 13, 1966. This would allow a minimum of time for traveling and vacation coupled with enough time to return my house to a livable condition before school starts.
The following memorandum, dated April 12, 1966, was sent to E. A. Brittenham, chief engineer, GAC, from R. W. Richardson, vice president, GAC:
As you know we are in the process of completing some negotiations for a considerable amount of work on the 707, 720 and 747 airplanes. One of the key things that helped us put this deal together was the excellent engineering support and cooperation. Your cooperation in helping us place engineers at Boeing is most sincerely appreciated as it was very instrumental in the transaction.
The group of people that you have had in Seattle for the past year have done an excellent job and have made a fine reputation for themselves and for our company. The caliber, efforts, and past record of these people was very well recognized on the part of Boeing as they negotiated with us last week.
I want to take this opportunity to thank you and your fine engineering team in Seattle for the excellent support.
In June 1966, petitioner was again asked by GAC to extend his assignment. On June 10, 1966, petitioner entered into an agreement with GAC extending his assignment to Boeing to June 30, 1967. This agreement provided for an allowance of $10 per day, $5 when on vacation, and a $600 allowance for actual travel expenses for a family trip to Akron and return.
The following letter, dated June 10, 1966, was sent to Robert Dodson, petitioner's future landlord, Seattle, Wash., from D. W. Brown, manager, Engineering Administration, GAC:
Goodyear Aerospace Corporation has present contractual commitments to the Boeing Company which will require the services of some of our Engineering personnel to be located in Seattle for approximately one year from this date.
Barring termination of such contract or fortuitous occurrences to our employee Mr. Stricker, it is our intention to have him remain on this assignment throughout the period.
The following letter, dated June 13, 1966, was sent to petitioner by E. A. Brittenham, chief engineer, GAC:
Mr. Pipitone advised me that you have agreed to extend your assignment at Boeing until 1967.
Your personal support of the tremendous technical challenge at Boeing is an important factor in Goodyear Aerospace being selected as a major subcontractor on the 707 and 747. Your personal decisions and efforts at Boeing are an indication of your loyalty to Goodyear and an understanding of the work relation we have to maintain in the industry.
Please accept my thanks and appreciation for having agreed to continue your good work at Boeing.
Petitioner and his family returned to Akron for a full month during July and August 1966 during which time they worked on their house and yard in order that their house would appear to be inhabited. During the trip petitioner learned that his house, when uninhabited for more than 30 days, was not protected by insurance. The house had been a constant worry even before petitioner learned of this, and since he and his wife had contemplated building a new house even before they left for Seattle, they decided to put the house up for sale. In August 1966 petitioner listed his home for sale with a real estate brokerage firm.
Upon his return to Seattle with his family, petitioner rented an unfurnished house under a 12-month written lease. Petitioner had to furnish the house completely for his entire family which he did at a cost of $1,069.39.
A buyer was found for petitioner's house in Akron in March 1967. By this time the house was no longer listed for sale and petitioner was under no obligation to sell it. Petitioner had previously been asked by GAC to extend his assignment again. He had refused to do so as he could not be guaranteed that the extension would insure his stay in Seattle for another full year. Petitioner intended to return to Akron at the end of June of that year. Nevertheless he decided to sell his house in Akron and to live temporarily in a travel trailer when he returned to Akron until he could find a place to rent and subsequently build a house. The Akron house was sold on March 5. The new owner took possession in May, at which time petitioner placed his furniture in storage.
Petitioner completed his assignment at Boeing on June 30, 1967, after which he returned to his job at GAC's plant in Akron, Ohio. Petitioner was one of 40 GAC engineering personnel (Akron) who were assigned to Boeing in 1965. Of this number 28 remained at Boeing for more than 1 year. Of these 28, 17 remained for more than 2 years.
Petitioner's work assignments at Boeing were under the exclusive control of Boeing. He was not advised of his initial assignment until his arrival at Boeing. While petitioner remained on assignment at Boeing he performed the same type of service as a weight engineer for various Boeing projects. Petitioner was GAC's only weight engineer at Boeing from September 17, 1965, to his departure in July 1967.
The following letter, dated October 9, 1969, was written by H. A. Walker, manager, Salaried Personnel Department, GAC:
TO WHOM IT MAY CONCERN:
Mr. Walter P. Stricker has been an employee of our organization for approximately 19 years, and performed his services at our plant in Akron, Ohio for the entire period preceding his assignment to the Boeing Company, Renton, Washington.
Mr. Stricker was assigned to the Renton location under an agreement dated March 22, 1965, said assignment being of a temporary nature, which was originally considered to last approximately six (6) months. This assignment was made pursuant to a contract between Goodyear Aerospace Corporation and The Boeing Company. This contract was extended and modified from time to time and Mr. Stricker was extended in his assignment until June 30, 1967, which is the time he returned to our Akron plant, and remains in the same employment with our Company as he did during the time preceding and during the period of this assignment.
This assignment has always been considered to be of a temporary nature, Mr. Stricker has remained on the company payroll during the entire period in question, Mr. Stricker has maintained his same job classification during this period, and Goodyear Aerospace Corporation has reimbursed Mr. Stricker for his living expenses while on said assignment.
The reimbursement of living expenses was made under the policies established by the Goodyear Aerospace Corporation, with respect to personnel on assignments such as this Boeing assignment.
As an employee of Goodyear Aerospace Corporation, Mr. Stricker is expected to carry out his functions for the benefit of the company as requested by the company, and in so doing, benefits both himself and the company.
Mr. Stricker had no control over the details relating to his assignment to the Boeing Company, Renton, Washington and any extensions made in his original assignment to the Boeing Company were made by Goodyear Aerospace Corporation, on an as-need basis, as the changes and modifications of the original contract under which he was assigned were modified.
During the period January 1, 1967, to July 2, 1967, GAC paid petitioner a per diem allowance of $10 totaling $1,830. Petitioner included this amount on his 1967 tax return and claimed a deduction therefor as an employee business expense. In his statutory notice of deficiency the Commissioner disallowed the claimed deduction with the following explanation:
The deduction of $1,830.00 claimed for travel expense is not allowed because it has not been established that the expense qualifies as deductible trade or business expense within the meaning of sections 62(2)(B) and 162(a)(2) of the Internal Revenue Code.
OPINION
During the first 6 months of 1967, GAC paid petitioner a living allowance of $10 per day, or a total of $1,830. We must decide whether petitioner may deduct this amount, which was included in his reported income, under section 162(a)(2). Section 162(a) provides that 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 traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.
The only obstacle which the Commissioner has placed in the way of allowance of the deduction is his contention that during the first 6 months of 1967 petitioner's ‘home’ was in Seattle or Renton, Wash., so that the expenses incurred there were not incurred ‘away from home.’ Petitioner contends that during the first 6 months of 1967 his ‘home’ was in Akron, Ohio.
In the case of a taxpayer who is on a work assignment away from his principal place of employment, this Court has established its position that he is ‘away from home’ only when his assignment is for a ‘temporary’ as distinguished from a ‘substantial,’ ‘indefinite,‘ or ‘indeterminate’ period of time. We have characterized an employment as being ‘indefinite’ if its termination cannot be foreseen within a fixed or reasonably short period of time. John J. Harvey, 32 T.C. 1368, revd. 283 F.2d 491, 492 (C.A. 9, 1960), and the cases cited therein. See also Ronald D. Kroll, 49 T.C. 557.
The Court of Appeals, Ninth Circuit, in its reversal of Harvey, stated its view that the place where a taxpayer is employed for an ‘indefinite’ term—indefinite in the sense that its exact duration could not be predicted— can, in some circumstances, qualify as an employee's ‘away from home’ post. To determine in what circumstances this may be the case Court of Appeals devised the following test, having regard to the apparent purpose of the deduction to equalize the burden of living expenses between the taxpayer whose employment requires travel and the taxpayer whose employment does not:
An employee might be said to change his tax home if there is a reasonable probability known to him that he may be employed for a long period of time at his new station. What constitutes ‘a long period of time’ varies with circumstances surrounding each case. If such be the case, it is reasonable to expect him to move his permanent abode to his new station, and thus avoid the double burden that the Congress intended to mitigate. On the other hand, if it is very likely that taxpayer's stay away from home will be short; then it seems quite unreasonable to expect him to move his domicile, even though it cannot be said that his employment will terminate ‘within a fixed or reasonably short period,‘ to use the words of the Tax Court. (238 F.2d at 495.)
Under either the temporary-indefinite test of this Court or under the Harvey test, we think Boeing failed to qualify as petitioner's ‘away from home’ post during the first 6 months of 1967. His assignment to Boeing, as of June 10, 1966, was both for an ‘indefinite’ and for a ‘substantial’ period of time as distinguished from ‘temporary.’ And, there was a reasonable probability known to him that he would be employed at Boeing for a ‘long period of time’ within the meaning of the Harvey test. See Doyle v. Commissioner, 354 F.2d 480, 483 fn. 3 (C.A. 9, 1966), affirming a Memorandum Opinion of this Court.
We hold the expenses which petitioner incurred at Boeing are not deductible as expenses incurred ‘away from home’ within the meaning of section 162(a)(2).
Decision will be entered for the respondent.