Warren v. Comm'r of Internal Revenue, Docket No. 16261.

• Decision Date: 12 August 1949
• Docket Number: Docket No. 16261.
• Citation: 13 T.C. 205
• Parties: HENRY C. WARREN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

13 T.C. 205

HENRY C. WARREN, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 16261.

Tax Court of the United States.

Promulgated August 12, 1949.

1. Petitioner was continuously employed during the taxable year 1944 at the Navy Yard in Charleston, South Carolina, and lived there during that time. He found no housing accommodations for his wife and two children in Charleston and maintained a residence for them 300 miles from Charleston at Cornelia, Georgia, where he had lived prior to his employment at the Navy Yard. Petitioner's expenditures for meals and lodging in Charleston and for transportation between Charleston and Cornelia on week end visits, held, nondeductible because not incurred in pursuit of his employer's business. Commissioner v. Flowers, 326 U.S. 465(1946); rehearing denied, 326 U.S. 812(1947) followed.

2. Respondent made a refund to petitioner of a portion of his income tax withheld for 1944 and subsequently determined a deficiency against petitioner in income tax for 1944, disallowing certain deductions. Section 3746, Internal Revenue Code, providing that suits for recovery of erroneous refunds must be brought in the name of the United States within two years after the making of the refund, held not controlling as to the determination of deficiency, refunds of income tax withheld not being final so as to preclude subsequent disallowance of deductions. Clark v. Commissioner, 158 Fed.(2d) 851(C.C.A., 6th Cir., 1946).

3. Petitioner elected to itemize his deductions on ‘long form‘ 1040 in reporting his income for 1944, and respondent disallowed certain of these deductions. Held, petitioner is not thereafter entitled to take the standard deduction provided in section 23(aa), Internal Revenue Code, and to compute his tax under Supplement T, Internal Revenue Code, since under Regulations 111, sec. 29.402-1, such election must be made at the time of filing the return. R. C. Scott, Esq., for the petitioner.

N. A. Townsend, Esq., for the respondent.

Respondent determined a deficiency in income tax for the taxable year 1944 in the amount of $325.95. Two issues are presented for decision:

(1) Is petitioner, who was employed throughout 1944 at the Navy Yard in Charleston, South Carolina, and maintained a residence in Cornelia, Georgia, some 300 miles away, for his wife and children, entitled to a deduction in that year on account of expenditures for meals and lodging in Charleston and for transportation between Charleston and Cornelia?

(2) Where respondent made a refund to petitioner of a portion of his income tax withheld for 1944 and subsequently determined a deficiency against petitioner in income tax for 1944, is the determination of deficiency controlled by section 3746 of the Internal Revenue Code, which provides that suits for recovery of erroneous refunds must be brought in the name of the United States within two years after the making of the refund?

(3) Where petitioner elected to itemize his deductions on ‘long form‘ 1040 in reporting his income for 1944, and respondent disallowed certain of those deductions, is petitioner thereafter entitled to take the standard deduction provided in section 23(aa), Internal Revenue Code, and to compute his tax under Supplement T, Internal Revenue Code?

FINDINGS OF FACT.

Petitioner is a resident of Cornelia, Georgia. His income tax return for the calendar year 1944 was filed with the collector of internal revenue for the district of Georgia.

Petitioner was continuously employed from August 24, 1943, until September 21, 1945, at the United States Navy Yard in Charleston, South Carolina, approximately 300 miles from Cornelia, Georgia. Prior to his employment at the the Navy Yard he had lived in Cornelia and he maintained a residence for his wife and two children in that city during the period he was employed in Charleston. He found no housing accommodations for his family in Charleston. He lived in a barracks at Charleston and ate his meals in various restaurants in the vicinity of the Navy Yard. His wife visited him in Charleston from time to time. About four times a year petitioner returned to Cornelia for a week end visit with his family.

Petitioner's duties at the Navy Yard were those of a pipe fitter. He worked on the night shift six or seven days per week. His duties with the Navy Yard did not require him to leave Charleston at any time. He understood when he accepted the employment that his duties would be performed in Charleston.

The Navy Yard classified his position as ‘temporary,‘ but petitioner accepted the employment with the understanding that it would probably last for the duration of the war. He worked at the Navy Yard continuously until after the war with Japan had terminated.

On his 1944 income tax return petitioner reported wages from the Navy Yard in the amount of $3,580.98. Deductions were itemized on his return, Form 1040, and included, among others, a deduction of $1,355 for subsistence ‘while away from home at Charleston Navy Yard, Charleston, S.C.‘ This deduction represented the cost of petitioner's transportation to and from Cornelia and the cost of his meals and lodging in Charleston. Respondent disallowed the deduction.

During 1944 the sum of $399.20 was withheld as income tax from petitioner's wages by his employer. Petitioner's return for 1944 disclosed a tax liability of $47.14. Upon the basis of this information the collector of internal revenue for the district of Georgia made a refund to petitioner on or about July 20, 1945, in the amount of $358.14, representing withheld tax of $352.06 plus interest of $6.08.

Petitioner's 1944 return was filed March 13, 1945. The notice of deficiency was mailed to petitioner on August 5, 1947.

OPINION.

HARLAN, Judge:

Petitioner contends that the cost of his meals and lodging while he was employed in Charleston, South Carolina, and the cost of his transportation to and from Cornelia, Georgia, where he maintained a residence for his wife and children, are deductible under section 23(a)(1)(A), Internal Revenue Code, as travel expenses incurred while away from home in pursuit of a trade or business. Respondent determined that these expenditures were ‘personal, living or family expenses‘ within the meaning of section 24(a)(1), Internal Revenue Code, and hence not deductible.

The matter is governed by Commissioner v. Flowers, 326 U.S. 465 (1946); rehearing denied, 326 U.S. 812 (1946). In that case the taxpayer's post of duty in his employment was Mobile, Alabama, but he chose for personal reasons to maintain his residence in Jackson, Mississippi. He deducted in his 1939 and 1940 returns as traveling expenses the cost of trips from Jackson to Mobile and of meals and hotel accommodations while in Mobile. The Commissioner disallowed the deductions and the Supreme Court sustained the disallowance. In its opinion the Supreme Court said:

Three conditions must thus be satisfied before a traveling expense deduction may be made under section 23(a)(1)(A):

(1) The expense must be a reasonable and necessary traveling expense, as that term is generally understood. This includes such items as transportation fares and food and lodging expenses incurred while traveling.

(2) The expense must be incurred ‘while away from.‘

(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. Moreover, such an expenditure must be necessary or appropriate to the development and pursuit of the business or trade.

In the case at bar it is quite clear that the expenditures in question fail to satisfy the conditions stated above. Petitioner's maintenance of a home for his family in Cornelia may have been caused by a housing shortage in Charleston, but that consideration was irrelevant to the prosecution of his employer's business. The extra expense of his trips to and from Cornelia and of his living apart from his family in Charleston did not advance his employer's business. They were thus personal expenses, not business expenses, and are accordingly not deductible. Commissioner v. Flowers, supra; Ney v. United States, 171 Fed.(2d) 449 (C.C.A., 8th Cir., 1948); certiorari denied, 336 U.S. 967(1949); York v. Commissioner, 160 Fed.(2d) 385(1947); Virginia Ruiz Carranza (Zuri), 11 T.C. 224; William W. Todd, 10 T.C. 655; John D. Johnson, ...