Flett v. Commissioner

• Citation: 1960 TC Memo 157,19 TCM (CCH) 825
• Decision Date: 20 July 1960
• Docket Number: Docket No. 71216,79356.
• Parties: Austin T. Flett v. Commissioner.
• Court: United States Tax Court

19 T.C.M. (CCH) 825 (1960)

T. C. Memo. 1960-157.

Austin T. Flett v. Commissioner.

Docket Nos. 71216, 79356.

United States Tax Court.

Filed July 20, 1960.

Austin T. Flett, pro se, 135 South La Salle Street, Chicago, Ill., Arthur N. Nasser, Esq., for the respondent.

Memorandum Findings of Fact and Opinion

FORRESTER, Judge:

Respondent has determined deficiencies in the income tax of petitioner and additions thereto for the years 1955, 1956 and 1957 as follows:

                                             Addition under
                  Year         Deficiency     Section 66541
                  1955......... $568.86          $22.75
                  1956.........  949.29           19.98
                  1957.........  901.17           15.62
                

Petitioner does not take issue with the additions to tax under section 6654.

The following schedule shows petitioner's deductions for the years 1955, 1956, and 1957 which are now in issue to the extent indicated by respondent's respective determinations:

                -------------------------------------------------------------------------------
                                                                 Amount   Amount Disallowed
                      Item Deducted                             Deducted    by Respondent
                -------------------------------------------------------------------------------
                                                1955
                  Outside Office Expense....................   $  280.00      $  280.00
                  Medical Expense: Petitioner's Wife........    2,000.00       2,000.00
                                   Petitioner ..............      375.00         269.88
                                                1956
                  Outside Office Expense....................      240.00         240.00
                  Travel Expense to Washington..............      588.47         588.47
                  Group Insurance ..........................      229.14         229.14
                  Medical Expense: Petitioner's Wife........    2,000.00       2,000.00
                  Sales Tax, Gas Tax and Auto License.......      276.50          73.86
                                                1957
                  Long-Distance Train and Plane Expense
                   (Home to Washington, D. C.)..............      481.95         481.95*
                  Travel Expense
                     Hotel and Other Services (in Chicago)      1,036.91       1,036.91*
                     Meals (3 per day for 350 days)..........   1,645.00       1,645.00*
                     Miscellaneous Expenses at Hotel Laundry
                      etc. (50 weeks)........................     175.00         175.00*
                  Group Insurance ...........................     285.24         285.04**
                  Sales Tax, Gas Tax and Auto License........     276.50          92.15***
                -------------------------------------------------------------------------------
                * Due to an error in the notice of deficiency, the total of these amounts was shown as $3,338.77
                rather than the correct amount of $3,338.86
                ** The 20-cent discrepancy is unexplained
                *** Respondent now concedes that only $83.75 should be disallowed.
                

In addition to the above, respondent's determination adds self-employment tax for the years 1956 and 1957 under the provisions of section 1401.

General Findings of Fact

Petitioner filed his individual income tax returns for the calendar years in issue with the district director of internal revenue, Chicago, Illinois.

Petitioner lived with his wife and family in a rented house in Naperville, Illinois, and commuted to Chicago each day to conduct his business until about 1947. During the years in issue and for some years prior, he was associated as an insurance broker with W. A. Alexander & Company, a general line insurance firm at 135 South LaSalle Street in Chicago. This was his only place of business. He maintained office space there and all but a nominal amount of his income during the years in issue was derived from this association.

Issue 1. Medical Expense Deductions

Findings of Fact

In about 1944, petitioner's wife contracted a crippling form of rheumatoid arthritis which was apparently aggravated by the Illinois climate. In about 1947, acting on the advice of doctors, petitioner purchased a house in Phoenix, Arizona, to which he moved his wife and household belongings. Petitioner remained in Chicago and during the years in issue, he lived in a downtown hotel room and sent his wife $150 to $200 each month for living expenses as well as making the mortgage payments on the Phoenix house.

The health of petitioner's wife improved in the Arizona climate and during the years in issue she did not see any doctors, take any treatments or receive any medication. During these years one of petitioner's adult daughters lived with and aided his wife and contributed a small part of the Phoenix household expenses.

Opinion

The issue framed is the factual determination of whether petitioner is entitled to certain claimed medical deductions under section 213, Internal Revenue Code of 1954,² which were disallowed by respondent for the years in question. As we informed petitioner during the trial of this case, the burden is upon him to overcome the prima facie correctness of respondent's determination. Having carefully sifted the barren record before us, we must conclude that petitioner has failed to carry this burden.

Under the Internal Revenue Code of 1954, as was the case with that of 1939, it is sometimes hard to distinguish between an allowable medical expenditure and an expenditure that is primarily a personal living expense,³ but it is only the former that is deductible. Bertha M. Rodgers, 25 T. C. 254, 259 (1955) Dec. 21,336, affd. 241 F. 2d 552 (C. A. 8, 1957) 57-1 USTC ¶ 9478; Frances Hoffman, 17 T. C. 1380 (1952) Dec. 18,805; L. Keever Stringham, 12 T. C. 580 (1949) Dec. 16,916, affd. 183 F. 2d 579 (C. A. 6, 1950) 50-2 USTC ¶ 9367.

Petitioner claims a flat deduction of $2,000 as a medical expense for his wife during the years 1955 and 1956. She was not under the care of any doctor during these years nor did she receive any treatment or medication. The record discloses only two direct expenditures made by petitioner on behalf of his wife during said period, i.e., the monthly sums he sent her and the mortgage payments on the house in Phoenix where she lived.

The mere fact that petitioner's wife was residing where the climate was beneficial to her arthritic condition at the time petitioner sent her the $150 to $200 per month does not, in and of itself, qualify these payments as medical expenditures. Frances Hoffman, supra. Petitioner himself states that these amounts were for her "to live on," and he has not established that these funds were used by his wife for any medical purpose.

The mortgage payments made by petitioner on the Phoenix house in which his wife resided during the years in issue constituted capital expenditures, which are not deductible as medical expenses. Frank S. Delp, 30 T. C. 1230 Dec. 23,167.

In addition to the above direct expenditures, petitioner also seems to contend that his own living expenses in Chicago were greatly increased because of his wife's absence, and that this increase should be allowed under section 213, supra. That the illness of one member of a family cannot make deductible any increase in the personal living expenses of other family members was the precise question decided in Samuel Ochs, 17 T. C. 130 Dec. 18,452, affd. 195 F. 2d 692 52-1 USTC ¶ 9271, certiorari denied 344 U. S. 827, and thus petitioner's contention fails. We note also that petitioner has failed to prove the amount of this claimed increase in his own living expenses, or that any such increase in fact existed.

Petitioner did not introduce any evidence with respect to respondent's disallowance of part of petitioner's own medical expense claimed and deducted for 1955.

For the above reasons, respondent's disallowance of petitioner's claimed and deducted medical expenses for 1955 and 1956 is sustained.

Issue 2. Away-from-Home Expenses

Findings of Fact

After moving his wife to Phoenix, petitioner initially spent 1 out of every 3 months with her there, but because of economic circumstances he was soon forced to curtail such trips. His 1957 return indicates that he may have spent about 2 weeks in Phoenix, but the record is otherwise silent as to the amount of time petitioner spent in Phoenix during the years in issue.

On his 1955 and 1956 income tax returns petitioner showed his "Home Address" as 701 North Michigan Avenue, Chicago, (the address of the aforesaid downtown hotel). On his 1957 return he struck the word "Home" from the form and showed his address as 135 South LaSalle Street, Chicago.

Opinion

Petitioner does not claim medical deductions for 1957, but contends that his residence during that year was Phoenix, Arizona and that he is therefore entitled to deduct his personal expenses incurred while conducting his trade or business in Chicago under section 162(a)(2). Petitioner's estimate of this claimed deduction, which he termed "Travel Expenses," was calculated on the basis of his having spent 50 weeks in Chicago, and the record shows that he conducted his insurance business from, and maintained his office in, Chicago, and derived almost all of his income from this insurance business. Thus, we have found from all of the facts that during 1957, petitioner's principal place of business and his "home," as that term is used in the statute, were in Chicago; thus his estimated cost of living there for that year does not constitute an ordinary and necessary expense of his trade or business. See Commissioner v. Flowers, 326 U. S. 465 (1946) 46-1 USTC ¶ 9127, and James M. Eaves, 33 T. C. 938 (filed February 23, 1960) Dec. 24,060. As we stated in the Eaves case, supra:

"A worker who maintains a home as a family residence at one place while engaging in his trade or occupation at another place is not entitled to deduct from his gross income expenses which he incurs for meals and lodging at his principal place of employment. Claunch v. Commissioner, 264 F. 2d 309 59-1 USTC ¶ 9307, affirming 29 T. C. 1047 Dec. 22,873."

Issue 3. Travel Expense Claimed as Ordinary and Necessary Business Expense

Findings of Fact

During the years in issue...