Fenstermaker v. Commissioner
| Decision Date | 07 June 1978 |
| Docket Number | 11067-76,11068-76.,Docket No. 11066-76 |
| Parties | James P. Fenstermaker and Margaret J. Fenstermaker, et al. v. Commissioner. |
| Court | U.S. Tax Court |
John A. Dunkel, Glenn A. Nadell, and Michael R. Becker, 37 West Broad St., Columbus, Ohio, for the petitioners. Mary Helen Weber, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent has determined the following deficiencies in the petitioners' Federal income taxes:
Taxable
Petitioner Year Deficiency
James P. and Margaret J
Fenstermaker ........... 1972 $230.00
1973 560.00
Arthur G. and Josephine C
Green .................. 1972 526.65
1973 22.91
Robert J. and Harriett D
Grueser ................ 1972 879.80
1973 303.15
The issues are: (1) whether amounts paid by their employer to the petitioner-husbands for their wives' expenses at annual trade association conventions resulted in taxable income to petitioners; (2) whether certain amounts reimbursed to the petitioner-husbands by their employer for dues, fees, and expenses at social, athletic, and country clubs resulted in taxable income to petitioners; (3) whether the amount reimbursed to petitioner Robert J. Grueser by his employer for Christmas gifts resulted in taxable income to him; and (4) whether amounts reimbursed to petitioner-husbands by their employer for the cost of certain lunches resulted in taxable income to them.
Some of the facts have been stipulated and are so found.
Petitioners James P. and Margaret J. Fenstermaker resided in Groveport, Ohio, when they filed their petition. They filed their joint Federal income tax returns for 1972 and 1973 and an amended return for 1972 with the Internal Revenue Service Center in Cincinnati, Ohio. Petitioners Arthur G. and Josephine C. Green resided in Columbus, Ohio, when they filed their petition. Petitioners filed their joint Federal income tax returns for 1972 and 1973 and an amended return for 1972 with the Internal Revenue Service Center in Cincinnati, Ohio. Petitioners Robert J. and Harriett D. Grueser resided in Columbus, Ohio, when they filed their petition. They filed their joint Federal income tax returns for 1972 and 1973 with the Internal Revenue Service Center in Cincinnati, Ohio.
The petitioner-husbands are executives of the Columbus and Southern Ohio Electric Company (the Company). During 1972 and 1973, petitioner Arthur G. Green was president, chief executive officer, and a director of the Company. In 1973, he also served as chairman of the board of directors. During 1972 and 1973, petitioner Robert J. Grueser was executive vice president and a director of the Company, and petitioner James A. Fenstermaker was senior vice president for operations of the Company. Although the petitioners each owned stock in the Company, their interests therein were nominal in relation to the total average number of shares outstanding; the Company's common and preferred shares are listed and widely traded on the New York Stock Exchange.
The Company is a public utility engaged principally in the generation and sale of electricity in central and southern Ohio. Its principal office is located in Columbus, Ohio, where the petitioners worked.
The Company is and, during 1972 and 1973, was a member of the Edison Electric Institute (EEI) and the Association of Edison Illuminating Companies (AEIC). EEI is a trade association of the nation's electric utility companies. One of its main functions is to work collectively on a wide range of industry problems through various committees. Among other things, the committees conduct investigations and research and development, keep members updated on current developments, and follow government and industry policies. AEIC is a similar association of utilities that at one time have had "Edison" in their names.
Petitioner-husbands occasionally are required to travel on behalf of the Company. Most of their travel involves attending various technical meetings. Normally they would attend those meetings without their wives. Once in 1972 and twice in 1973, however, petitioners attended EEI and AEIC conventions with their wives.
On June 5-7, 1972, petitioners and their wives attended the EEI convention in San Diego, California. Mr. Green also took his daughter. Except for a reimbursement to the Company for his daughter's expenses, all expenses for the convention were paid or reimbursed by the Company.2 The following amounts received from the Company are attributable to petitioners' wives:
Josephine C. Green ................ $561.78
Harriett D. Grueser ............... 385.05
Margaret J. Fenstermaker .......... 388.34
The annual convention of EEI for 1973 was held in Dallas, Texas, on April 2-4, 1973. The petitioners again represented the Company with their wives. The expenses of their wives were paid or reimbursed by the Company as follows:
Josephine C. Green ................ $454.35
Harriett D. Grueser ............... 319.66
Margaret J. Fenstermaker .......... 412.74
In 1973, petitioners Green and Fenster-maker also attended the annual convention of AEIC. The convention was held on October 24-27 at White Sulphur Springs, West Virginia. Again, petitioners represented the Company and attended with their wives. The expenses for their wives, which were paid or reimbursed by the Company, were $155.71 for Mrs. Green and $145.28 for Mrs. Fenstermaker.
At each of the conventions, petitioners attended various technical discussions and meetings. In addition, the programs provided for social events and entertainment. Those events were designed for the enjoyment of the convention participants and their spouses. Petitioners attended with their wives, and 80 percent to 85 percent of others attending were also accompanied by spouses. Luncheons and fashion shows were given especially for wives, and they were invited to attend the business sessions too. There were also several leisure and recreational activities designed for all those attending. At both EEI conventions, a special tour was available for sightseeing and a special evening entertainment program was arranged. At the AEIC convention, provisions were made for golf, skeet and trap shooting, and bowling tournaments. Again, except for the business sessions, most of the activities were designed specifically for couples. However, the primary business reason for the conventions was the technical business meetings and lectures. The social functions at the conventions were mainly personal in nature. In this regard, we note that petitioners Green and Grueser had attended the conventions in the past without their wives. When their wives were not present, they usually attended fewer of the social functions but they still would attend all of the technical business meetings and lectures.
In 1972 and 1973, each of the petitioner-husbands was a member of various country and athletic clubs in Columbus, Ohio. They joined the clubs pursuant to Company policy. The Company, hoping that its goodwill would be promoted by the membership of its officers in various social and service clubs, reimbursed them for their club dues, fees, and expenses. Usually the Company designated the clubs to which its officers would belong. This would ensure that too many officers did not belong to the same clubs, thus allowing greater community contact. Also, some service clubs would permit only one member from any single company to join.
In 1972 and 1973, petitioner Green was a member of the Columbus Country Club. The club is located in Columbus, Ohio, and has facilities for swimming, tennis, golf, and dining. The Company reimbursed Mr. Green for all his dues, fees, and expenses at the country club except certain items charged by him to his personal account.
In 1972, petitioner spent the following amounts at the Columbus Country Club, for which he received reimbursements:
Dues and men's golf fees .......... $ 744.00
Locker fees, prize fund donation
Christmas donation
and miscellaneous items .......... 101.50
Luncheon expense .................. 12.28
Other dining expenses ............. 50.51
________
Total Reimbursements .......... $ 908.29
Respondent determined that all but $50.51 (other dining expenses) was additional income to petitioner Green. Petitioner had also incurred dining expenditures at the club in the amount of $253.01, which he charged to his personal account. During 1972, he used the dining facilities of the club twelve times for personal purposes and twice for business. The luncheon expense of $12.28 was for a lunch with petitioner Grueser. Green and Grueser discussed a rate financing case and certain Company operating problems at the lunch. The other reimbursed fees and expenses represent the normal costs associated with a country club membership.
In 1973, petitioner Green spent the following amounts at the Columbus Country Club, for which he again received reimbursement:
Dues and men's golf fees ........... $ 744.00
Locker fees, prize fund donation
Christmas donation,
and miscellaneous items ........... 101.50
Luncheon expenses of Mrs.
Green ............................. 146.46
Other dining expenses .............. 120.52
_________
Total Reimbursements ........... $1,112.48
Respondent determined that all but $120.52 (other dining expenses) was additional income to petitioner. Petitioner had also incurred dining expenditures of $340.87 which he again charged to his personal account. During 1973, he used the club's dining facilities...
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