Feistman v. Comm'r of Internal Revenue
| Decision Date | 12 November 1974 |
| Docket Number | Docket No. 3282-73. |
| Parties | EUGENE G. AND LORRAINE B. FEISTMAN, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Eugene G. Feistman, pro se.
Earl Goldhammer, for the respondent.
1. Petitioners, employees of the City and County of Los Angeles, belonged to retirement plans which required that portions of their earnings be contributed to their respective retirement funds. Participation in the plans was compulsory and the employees' rights thereunder were nonforfeitable. Held, amounts withheld from their earnings and paid to the respective funds on their behalf were not excludable from their gross income.
2. Disallowance of deductions for educational expenses approved.
3. Disallowance of commuting expense deductions approved.
The Commissioner determined deficiencies in petitioner's income tax in the amounts of $951.17, $612.23, $649.92, and $1,069 for the respective calendar years 1968 through 1971. Several issues were resolved by the parties prior to and during the trial. The only issues which remain to be decided are: (1) Whether petitioners; who were employees of the County and City of Los Angeles and who were cash basis taxpayers, must include in their gross income amounts withheld from their salary and contributed to retirement systems on their behalf, where participation in the systems is required by State law as a condition of employment; (2) whether certain educational expenses are deductible; and (3) whether petitioners' commuting expenses are deductible.
The parties have filed a stipulation and two supplemental stipulations of fact along with exhibits which are incorporated herein by this reference.
Petitioners are husband and wife. They filed joint Federal income tax returns for the calendar years 1968 through 1971, inclusive, with the district director of internal revenue at Los Angeles, Calif. During the taxable years and at the time they filed their petition herein they resided in Sepulveda, Calif., a part of the city of Los Angeles. They reported their income according to the cash receipts and disbursements method of accounting.
Retirement contributions.—During the years at issue Mr. Feistman was employed by the County of Los Angeles as a deputy probation officers, and Mrs. Feistman was employed as a teacher by the Los Angeles City School District. As a condition of their employment, both petitioners were required by law to participate in the retirement systems of their respective employers. As a result, certain amounts were withheld each year from their gross wages as employee contributions to their respective retirement funds. The amounts of the gross wages and retirement contributions for each petitioner in each of the taxable years are shown in the following table.
Under each plan complementary contributions on behalf of each employee were also made by the employer.
The retirement plans of both Mr. and Mrs. Feistman were compulsory nonforfeitable plans in that each petitioner was required to contribute to the retirement plan from his gross wages and each petitioner was entitled to a refund of his contributions upon termination for reasons other than death or retirement from his employment.
On their 1970 and 1971 income tax returns, petitioners reduced the amount of their reportable gross income by deducting therefrom the amount of the retirement contributions which had been withheld from their wages. Although they did not do the same in respect of their 1968 and 1969 returns, they did file claims for refund of taxes for those years in which they claimed that their earnings for 1968 and 1969 should have been similarly reduced. The Commissioner did not allow these claims for refund in respect of 1968 and 1969, and, in determining the deficiencies for 1970 and 1971, he disapproved petitioners' reduction of their gross income by the amounts of their contributions to the retirement systems.
Educational expenses—Mr. Feistman and Feistman children.—Mr. Feistman's duties as a deputy probation officer were primarily to conduct factual investigations, the results of which were taken into account in the course of imposition of sentences upon persons found guilty of various crimes. In particular, for several years, he was assigned to investigate corporate securities cases.
Neither being a lawyer nor taking law courses was a requirement of Mr. Feistman's position. Nevertheless, like some of his colleagues, he undertook the study of law. He first took some law courses, apparently not as a candidate for a degree. Later, in 1966 and 1967 he began to attend San Fernando Valley College of Law, and during the years 1968 through 1971 he was a regularly enrolled night student at that law school. He graduated and took his law degree in August 1971. He took the California bar examination in August 1971, and August 1972, but did not pass on either occasion. He plans to take the examination again in February 1975.
During each of the taxable years petitioners had five dependent children. In the years 1968, 1969, and 1970 petitioners spent certain amounts for the education of these children.
On their 1968 income tax return, petitioners deducted $1,105.31 as ‘Cost of Education.’ The Commissioner allowed $33 of that amount as a deduction. The remaining amount disallowed represented educational expenditures relating to Mr. Feistman's law school expenses and school expenses of the Feistman children.
On their 1969 income tax return petitioners deducted various educational expenses aggregating $1,148.39. These expenses related in part to Mr. Feistman's legal education and in part to the education of the Feistman children.
On their 1970 income tax return petitioners deducted $380.09 as ‘Education.’ The Commissioner allowed a deduction of $83 in respect of this amount. No part of the remainder was shown to relate to anything other than Mr. Feistman's legal education or the education of the Feistman children.
On their 1971 income tax return petitioners deducted $385.45 as ‘Univ. San Fernando College of Law.’ The Commissioner disallowed this deduction in full.
Commuting expenses.—The place of work of each petitioner was in the city of Los Angeles, but both places were at a considerable distance from their home. During the taxable years both commuted to work by automobile, In Mrs. Feistman's case the round trip was 75 miles and in Mr. Feistman's case it was 50 miles. Mr. Feistman's position with the county required that he have a valid driver's license, and; also that he have his automobile available at work. However, because of the inconvenient nature of available public transportation, he probably would have driven to work in any event, regardless of this requirement. deducted $310, $1,154.10, and $310, respectively, as costs of transportation between their home and their places of employment. The figure for 1970 includes depreciation on two cars totaling $860. The Commissioner disallowed these deductions.
1. Contributions to retirement fund.—Petitioners contend that the amounts withheld from their salaries and paid into their respective retirement funds should be excluded from their wages reportable as gross income. The retirement systems involved are comparable in all significant respects to the retirement system applicable to Federal employees, and it has been established for many years that amounts withheld from salary and contributed to the applicable system are includable in the employee's currently reportable gross income. This has been reflected not only in rulings and practice of long standing (T.D. 3112, 4 C.B. 76 (1921), declared obsolete by Rev. Rul. 69-31, 1969-1 C.B. 307, 308; I.T. 2162, IV-1 C.B. 29 (1925); Mim. 3995, XXI-1 C.B. 25 (1933); I.T. 3362, 1940-1 C.B. 18; Rev. Rul. 56-473, 1956-2 C.B. 22, clarified by Rev. Rul. 72-94, 1972-1 C.B. 23; Rev. Rul. 57-326, 1957-2 C.B. 42; Rev. Rul. 72-250,...
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