931 F.2d 132 (1st Cir. 1991), 90-2165, Andrews v. C.I.R.

Docket Nº:90-2165.
Citation:931 F.2d 132
Party Name:Edward W. and Leona J. ANDREWS, Petitioners, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent, Appellee.
Case Date:April 24, 1991
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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931 F.2d 132 (1st Cir. 1991)

Edward W. and Leona J. ANDREWS, Petitioners, Appellants,



No. 90-2165.

United States Court of Appeals, First Circuit

April 24, 1991

Submitted March 25, 1991.

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Raymond A. Snow and Paul J. Molloy, on brief, Somerville, Mass., for petitioners, appellants.

Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen, Richard Farber and Christine A. Grant, Tax Div., Dept. of Justice, on brief, for respondent, appellee.

Before CAMPBELL, SELYA and CYR, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

Edward W. Andrews and his wife, Leona J. Andrews, 1 brought this action in the Tax Court for a redetermination of an income tax deficiency that the Commissioner had assessed for the tax year 1984. At issue is Andrews' deduction of travel expenses, including meals and costs associated with maintaining a second home at Lighthouse Point, Florida, as "traveling expenses ... while away from home in the pursuit of a trade or business." 2 Internal Revenue Code of 1954, 26 U.S.C. Sec. 162(a)(2). 3 Personal

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living expenses are generally not deductible. 26 U.S.C. Sec. 262. The Tax Court sustained the Commissioner's disallowance of the deduction on the grounds that Andrews was not "away from home" when these expenses were incurred. Andrews v. Commissioner, 60 T.C.M. (CCH) 277, T.C. Memo 1990-391. Andrews appeals to this court pursuant to 26 U.S.C. Sec. 7482.


We summarize the Tax Court's findings only to the extent helpful in understanding this decision. Andrews was president and chief executive officer of Andrews Gunite Co., Inc. ("Andrews Gunite"), which is engaged in the swimming pool construction business in New England, a seasonal business. His salary in 1984 was $108,000. Beginning in 1964, during the off-season, Andrews, establishing a sole proprietorship known as Andrews Farms, began to race and breed horses in New England, and in 1972 moved his horse business to Pompano, Florida. Andrews' horse business proliferated and prospered.

In 1974, Andrews Gunite diversified by establishing a Florida-based division, known as Pilgrim Farms, to acquire horses to breed with two of Andrews Farms' most successful horses and to develop a racing stable similar to Andrews Farms. By 1975, Andrews Farms had 130 horses, and by 1984 Pilgrim Farms had twenty to thirty horses. Andrews was responsible, in 1984, for managing and training Pilgrim Farms horses and Andrews Farms horses, though he was compensated for his services to Pilgrim Farms only by payment of his airfare to Florida. While in Florida during racing season, Andrews worked at the racetrack from seven in the morning until noon, and he returned to the track to solicit sales of his horses and watch the races on four nights per week.

Also, in 1983, Andrews' son, who had worked for Andrews Gunite, sought to establish a pool construction business in Florida. Andrews, along with his brother and son, formed a corporation, originally known as East Coast Pools by Andrews, Inc. and renamed Pools by Andrews, Inc., to purchase the assets of a troubled pool business in Florida. Andrews owned one-third of Pools by Andrews, Inc. in 1984. Andrews assisted his son in the Florida pool business, but drew no salary for his services. By the time of trial, this pool business was one of the biggest, if not the biggest builder of pools in Florida, with offices in West Palm Beach and Orlando and plans for a third office in Tampa.

Andrews resided in Lynnfield, Massachusetts with his wife prior to and during 1984. During this period, the expansion of the horse business required Andrews to make an increasing number of trips to Florida. In order to reduce travel costs and facilitate lodging arrangements, Andrews purchased a condominium in Pompano Beach, Florida in 1976, which he used as a residence when in Florida during the racing season. The neighborhood around the condominium became unsafe, and Andrews decided to move, purchasing a single family home with a swimming pool in Lighthouse Point, Florida in 1983. The home was closer than the condominium to the Pompano Beach Raceway, where Andrews maintained, trained, and raced many of the Andrews Farms and Pilgrim Farms horses. Andrews used the Florida house as his personal residence during the racing season.

The Tax Court concluded that in 1984 Andrews worked in Florida primarily in his horse business for six months, from January through April and during November and December, and that Andrews worked primarily in his pool construction business in Massachusetts for six months, from May to October. On his 1984 amended return, Andrews claimed one hundred percent business usage on his Florida house, and claimed depreciation deductions on the furniture

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and house in connection with his horse racing business. He also characterized tax, mortgage interest, 4 utilities, insurance, and other miscellaneous expenses as "lodging expenses," which he deducted in connection with the Florida pools and horse racing businesses, along with expenses for meals while he was in Florida. 5


The Tax Court correctly stated: "The purpose of the section 162(a)(2) deduction is to mitigate the burden upon a taxpayer who, because of the exigencies of his trade or business, must maintain two places of abode and thereby incur additional living expenses." See Hantzis v. Commissioner, 638 F.2d 248, 256 (1st Cir.), cert. denied, 452 U.S. 962, 101 S.Ct. 3112, 69 L.Ed.2d 973 (1981); Dilley v. Commissioner, 58 T.C. 276 (1972); Kroll v. Commissioner, 49 T.C. 557, 562 (1962). The Tax Court then stated its general rule that "a taxpayer's home for purposes of section 162(a) is the area or vicinity of his principal place of business." Responding thereafter to the Commissioner's contention that during the horse racing season Florida was Andrews' "tax home," rendering Andrews' Florida meals and lodging expenses personal and nondeductible living expenses under sections 262 and...

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