Carranza v. Comm'r of Internal Revenue, Docket No. 15758.

• Decision Date: 31 August 1948
• Docket Number: Docket No. 15758.
• Citation: 11 T.C. 224
• Parties: VIRGINIA RUIZ CARRANZA (ZURI), PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

11 T.C. 224

VIRGINIA RUIZ CARRANZA (ZURI), PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 15758.

Tax Court of the United States.

Promulgated August 31, 1948.

During the taxable year 1944 petitioner, who was a nonresident alien, was employed in New York City and spent all of her time in the city of her employment, although she continued to maintain a residence in Mexico, of which she was a citizen. In the city of her employment she incurred expenses for meals and lodging during the taxable year amounting to $1,360.50, and she deducted this amount as ‘traveling expenses‘ on her income tax return. The Commissioner disallowed the deduction. Held, the expenditures were personal expenses and not deductible as ‘traveling expenses‘ under section 23(a)(1)(A), I.R.C., Commissioner v. Flowers, 326 U.S. 465; held, further, that petitioner's claim to such deduction is not affected by her status as a nonresident alien. Theodore Witkin, C.P.A., for the petitioner.

Sheldon V. Elkman, Esq., for the respondent.

OPINION.

BLACK, Judge:

The Commissioner has determined a deficiency of $340.12 in petitioner's income tax for the year 1944. The deficiency is due to the disallowance by the Commissioner of $1,360.50 claimed as a deduction by petitioner for meals and lodging on her income tax return for 1944. The Commissioner explained his action in the deficiency notice as follows: ‘(a) It is held that the deduction claimed for traveling expense is not allowable under the provisions of section 23(a) of the Internal Revenue Code.‘ Petitioner contests this action of the Commissioner by an appropriate assignment of error.

The facts have been stipulated and may be summarized as follows:

The petitioner is Virginia Ruiz Carranza (Zuri), whose mailing address is care of Theodore Witkin, 10 East 40th Street, New York 16, New York. The return for the taxable year involved, 1944, was filed with the collector of internal revenue for the third district of New York. The petitioner at all times during the taxable period involved was a citizen of Mexico and a nonresident alien as regards the United States.

The petitioner, during 1944, was engaged in a trade or business in the United States, being employed by Loew's Inc., in New York City. During the course of employment by Loew's Inc., in the United States she incurred and paid $1,360.50 for meals and lodging in the United States, and during the same period she maintained a residence in Mexico. All services rendered by her to Loew's Inc., were rendered in New York, and the aforesaid expenses of $1,360.50 for meals and lodging were incurred and paid in New York.

The Commissioner of Internal Revenue ruled that the petitioner was a nonresident alien, subject to a withholding tax at the rate of 30 per cent.

We have only one issue to decide in this proceeding, and that is stated in petitioner's brief as follows: ‘Does the sum of $1,360.50 expended by the petitioner for meals and lodging in the United States during the calendar year 1944 constitute a business expense under section 23(a) of the Internal Revenue Code?‘¹

The petitioner argues in her brief that the Tax Court has held, following the Supreme Court's decision in Commissioner v. Flowers, 326 U.S. 465, that three conditions must be satisfied before a traveling expense deduction may be made under section 23(a)(1)(A) of the code, and that they are:

(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.

Petitioner then argues that, under the facts which have been stipulated, all three of the above conditions are met.

We do not agree with petitioner. It seems clear that, under the doctrine of the Flowers case, (3) above is not met by the facts which have been stipulated. In the Flowers case the Supreme Court said:

The added costs in issue, moreover, were as unnecessary and inappropriate to the development of the railroad's business as were his personal and living costs in Jackson. They were incurred solely as the result of the taxpayer's desire to maintain a home in Jackson while working in Mobile, a factor irrelevant to the maintenance and prosecution of the railroad's legal business. The railroad did not require him to travel on business from Jackson to Mobile or to maintain living quarters in both cities. Nor did it compel him, save in one instance, to perform tasks for it in Jackson. It simply asked him to be at his principal post in Mobile as business demanded and as his personal convenience was served, allowing him to divide his business time between...