Cooper v. Comm'r of Internal Revenue , Docket Nos. 3164-75
| Decision Date | 28 February 1977 |
| Docket Number | 6401-75.,Docket Nos. 3164-75 |
| Citation | 67 T.C. 870 |
| Parties | ROBERT E. COOPER, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, petitioner is entitled to deduct certain expenses incurred as a condition of his employment as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954. Robert E. Radke, for the petitioner.
George W. McDonald, for the respondent.
Respondent determined deficiencies in petitioner's Federal income tax as follows:
+--------------------+
¦Year ¦Deficiency ¦
+------+-------------¦
¦1972 ¦$92 ¦
+------+-------------¦
¦1973 ¦96 ¦
+--------------------+
Due to concessions, the sole issue remaining is whether certain expenses incurred by petitioner during the years in issue are deductible under section 162(a)1 as ordinary and necessary business expenses.
Some facts were stipulated and are so found.
Petitioner Robert E. Cooper resided in Van Nuys, Calif., at the time his petition was filed.
During the years in issue petitioner was employed as a fireman by the Los Angeles Fire Department and was assigned to Fire Station 89 in North Hollywood, Calif., as his permanent duty post. As such, petitioner normally worked 24-hour shifts2 and was not permitted to leave the fire station on personal business while on duty.
Petitioner is governed in his employment by the orders of his immediate superiors at the fire station-the Fire Chief and the Board of Fire Commissioners (the board).
At one time the Los Angeles Fire Department was completely segregated, with individual fire stations uniformly manned by members of the same race. Sometime during the 1950's the then mayor of Los Angeles and the city council duly ordered the board to integrate the City's fire stations. In an effort to comply with this order, some fire stations were closed and their firemen reassigned to other duty posts. However, the black firemen who were reassigned to fire duly ordered the board to integrate white firemen were forced to accept separate beds, lockers, and dining arrangements at their new duty posts.
In response to this form of discrimination, the board lawfully adopted rules and regulations requiring all firemen at each fire station to participate in a nonexclusionary organized mess at the station house, unless officially excused. The only recognized ground for nonparticipation was a physical ailment, which had to be periodically verified by the City's own examining physician. No other excuse relating to personal, religious, or ethnic considerations was acceptable.
As a fire department employee, petitioner was required to participate in the organized mess at his duty post, to the extent of paying his assessed portion of the cost thereof, for each 24-hour shift that he worked.
Petitioner objected to paying the amount assessed as his share of such cost for various nonracist reasons, including the fact that he was required to pay the money even though he was often away from the station on fire department business during the mess period. He relented, however, when threatened with disciplinary action, including his dismissal, if he refused to pay.
Participation in the mess by petitioner's employer consisted of merely providing the basic facilities for the mess.
On his Federal income tax returns for each of the years in issue petitioner deducted the amount of $283, which represented his mandatory contribution to the organized mess, as an ordinary and necessary business expense.
OPINIONThe sole issue presented is whether petitioner is entitled to deduct the required payment of his pro rata share of the cost of providing a nonexclusionary organized mess for the firemen at his place of employment as an ordinary and necessary business expense under section 162(a).
Section 162(a) provides in part as follows:
IN GENERAL.-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 * * *
We have previously held that a taxpayer may be in the trade or business of being an employee. David J. Primuth, 54 T.C. 374 (1970). Moreover, the fact that the expenses in question constituted a condition of petitioner's employment renders them ordinary and necessary within the meaning of section 162(a). See Welch v. Helvering, 290 U.S. 111 (1933). Thus, the focal point of our inquiry is whether the expenses in question were nondeductible personal expenses under section 262,3 or whether they constituted business expenses which were directly and proximately related to the active conduct of petitioner's trade or business, and therefore deductible under section 162(a).
Initially, we observe that many expenditures possess both personal and business attributes. In these situations placement of that often thin line which distinguishes a ‘personal expense’ from a ‘business expense’ depends primarily upon the facts and circumstances of each particular case. Cf. Robert J. Kowalski, 65 T.C. 44, 63 (1975) (Drennen, J., concurring and dissenting), revd. 544 F.2d 686 (3d Cir. 1976). For example, Rev. Rul. 75-316, 1975-2 C.B. 54, provides in part as follows:
The fact that a particular expense may under certain circumstances be a nondeductible personal expense does not preclude the deduction of such an expense as an ordinary and necessary business expense under other circumstances. * * *
For specific illustrations of this principle, see: sec. 1.262-1(b)(5), Income Tax Regs. (meals); Rev. Rul 58-382, 1958-2 C.B. 59 (); James A. Kistler, 40 T.C. 657 (1963) (); Louis M. Roth, 17 T.C. 1450 (1952) (home telephone expenses); Foeoletini Alo, T.C. Memo. 1976-397 (shoes and gloves); Arnold Roy Bushey, T.C. Memo. 1971-149 (prescription safety glasses).
In this case petitioner is a fireman who works shifts of at least 24 hours in duration. He is not permitted to leave the fire station on personal business while on duty, owing to the nature of his employment. Petitioner is required to financially participate in the organized mess at the fire station as a condition of his employment. He pays the assessed amount under protest, as he is frequently unable or unwilling to physically participate in the mess. Furthermore, the requirement that petitioner pay the assessed amount was not established by his employer for the petitioner's convenience or personal benefit. Rather, it was apparently established in order to comply with the legal and moral obligations owed by the City to its minority employees. Thus, from a realistic point of view, the payments in issue were a matter of business necessity on the part of both petitioner and his employer.
In summary, upon consideration on the entire record, including the unusual nature of petitioner's employment, the involuntary nature of the expense incurred, petitioner's limited ability to physically participate in the mess, and his employer's lack of intent to compensate or otherwise benefit petitioner by enacting the requirement, we find that the amounts in issue constitute business expenses rather than personal expenses.
In view of these findings, we conclude that petitioner's payment of $283 in each of the years in issue was directly and proximately related to the active conduct of his trade or business.4 Accordingly, we hold that petitioner is entitled to the claimed deduction in the amount of $283 for each of the years in issue.5
Decisions will be entered under Rule 155.
Reviewed by the Court.
I agree with the conclusion of the majority, but I have different reasons for so concluding. Section 119 allows an employee to exclude the value of meals or lodging furnished by and for the convenience of the employer, and the Treasury regulations have recognized that such exclusion is available in some situations when there is a charge for the meals or lodging. Section 1.119-1(a)(3), Income Tax Regs., provides:
(3) Meals furnished with a charge. (i) If an employer provides meals which an employee may or may not purchase, the meals will not be regarded as furnished for the convenience of the employer. Thus, meals for which a charge is made by the employer will not be regarded as furnished for the convenience of the employer if the employee has a choice of accepting the meals and paying for them or of not paying for them and providing his meals in another manner.
(ii) If an employer furnishes an employee meals for which the employee is charged an unvarying amount (for example, by subtraction from his stated compensation) irrespective of whether he accepts the meals, the amount of such flat charge made by the employer for such meals is not, as such, part of the compensation includible in the gross income of the employee; whether the value of the meals so furnished is excludable under section 119 is determined by applying the rules of subparagraph (2) of this paragraph. If meals furnished for an unvarying amount are not furnished for the convenience of the employer in accordance with the rules of subparagraph (2) of this paragraph, the employee shall include in gross income the value of the meals regardless of whether the value exceeds or is less than the amount charged for such meals. In the absence or evidence to the contrary, the value of the meals may be deemed to be equal to the amount charged for them.
Thus, under section 119, employees are not taxable on amounts charged for meals if four conditions exist: (1) The meals are furnished by the employer; (2) there is a charge for the meals which must be paid irrespective of whether the employee chooses to eat the meals and irrespective of how much he eats; (3) the meals are furnished for the convenience of the employer; and (4) the charge equals the value of the meals.
The employer did not purchase and supervise the preparation of the...
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