Heuer v. Comm'r of Internal Revenue

• Decision Date: 23 July 1959
• Docket Number: Docket No. 65538.
• Citation: 32 T.C. 947
• Parties: WILLIAM L. HEUER, JR., AND LUCILLE M. HEUER, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

32 T.C. 947

WILLIAM L. HEUER, JR., AND LUCILLE M. HEUER, PETITIONERS,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 65538.

Tax Court of the United States.

Filed July 23, 1959.

Elwood R. Clay, Esq., and Louis J. Dutrey, Esq., for the petitioners.

J. L. Bailey, Esq., for the respondent.

The petitioner, a Mississippi River boat pilot, received his piloting assignments from the pilot's association to which he belonged and was subject to call at any time. He used his automobile in driving from his residence to points of assignment and return, as well as between assignments. Held, that the portion of car expense and depreciation attributable to travel from his residence to points of assignment and return constitute nondeductible commuting expenses, but that the portion attributable to traveling between assignments is deductible. Secs. 23(a)(1)(A) and 23 (1), 1939 Code, and secs. 162(a) and 167(a), 1954 Code. The portions which are deductible determined.

ATKINS, Judge:

Respondent determined deficiencies in income tax of petitioners for the years 1953 and 1954 in the respective amounts of $547.64 and $423.20, and for the year 1953 determined additions to tax under section 294(d)(1)(A) and section 294(d)(2) of the Internal Revenue Code of 1939, in the respective amounts of $184.32 and $122.88.

The issue presented is whether the petitioner, a ship pilot, is entitled to deduct as ordinary and necessary business expenses, pursuant to section 23(a) (1)(A) of the Internal Revenue Code of 1939 and section 162(a)(2) of the Internal Revenue Code of 1954, the cost of maintaining and operating his automobile, as well as depreciation thereon, to the extent he used the car in traveling from his residence to points of assignment and return and in traveling from one assignment to another.

FINDINGS OF FACT.

The petitioners are husband and wife residing in New Orleans, Louisiana. They filed their joint Federal income tax returns for the years 1953 and 1954 with the district director of internal revenue in New Orleans, Louisiana. Since Lucille M. Heuer is a party to this proceeding only because she and her husband filed joint returns for the years 1953 and 1954, William L. Heuer will be referred to as the petitioner.

During the years 1953 and 1954 petitioner's occupation was that of a river pilot on the Mississippi River, engaged in piloting ships between Pilottown and New Orleans, a distance of about 90 miles, within the New Orleans harbor, and on the Intracoastal Canal and Industrial Canal. The Port of New Orleans extends from Southport to Belle Chasse, a distance of approximately 33 miles, and includes approximately 114 wharves or docks.

The petitioner holds a master of unlimited tonnage license, also referred to as a first-class pilot's license, issued by the United States Coast Guard, and was commissioned by the governor of the State of Louisiana as a river pilot under the provisions of State law, which gives him and other commissioned pilots the sole right to pilot any and all vessels on the Mississippi.

During such years he was a member and shareholder of the Crescent River Port Pilots' Association, hereinafter referred to as the association, through which he received pilotage assignments. This association is a corporation organized under the laws of the State of Louisiana in 1908.

Membership in the association consisted of 62 qualified river pilots, each owning 1 share of nontransferable stock costing $1,000 per share. The charter provides for the election of new members at the discretion of the present members. It also provides, among other benefits to members, for a pension plan for retired members.

The affairs of the association are governed by a board of directors consisting of five shareholders elected each year. The board of directors elects from among its members a president, vice president, and secretary and also appoints a treasurer-manager and an attorney neither of whom is a shareholder or member of the association.

The charter provides that no stockholder shall be liable for the debts of the association and that the association shall not be liable for the faults of any of its members occurring while the member is exercising his calling, profession, or office under and by virtue of his license from the United States, or of his commission from the governor of the State of Louisiana.

The members are governed by bylaws, rules, and regulations of the association concerning conduct of the pilots and procedures for carrying out pilot assignments. Fines and penalties are imposed on members for various infractions. Pilots are required to report to a ship one-half hour before sailing. If sailing is delayed because of failure of pilot to report aboard after he has been given sufficient time, the pilot is fined 1 day's pay. If he fails to take an assignment he may be fined 2 days' pay and laid off for 3 days.

The association maintains an office located in New Orleans, staffed by 9 employees, which remains open 24 hours a day. It dispatches assignments to the pilots. Louisiana statutes set forth the tariffs fixing the various fees licensed pilots may charge for specified services.¹ Tariffs are also provided fixing amounts which may be charged ship operators for pilots' transportation to and from certain docks and wharves. Each pilot, upon the rendition of services, obtains an order for the services rendered, which he delivers to the association. Under the charter all pilotage fees earned by the members are collected by the treasurer of the association and thereupon become its property. However, if it is necessary to institute legal proceedings to collect a fee, the suit is brought in the name of the pilot who rendered the service and the fee does not become the property of the association until collected and placed in the treasury of the association. Each month the association distributes to the members, upon the basis of the number of days and hours worked by each, the balance of income collected, after deduction of expenses.

Pilots are classified into two categories: Route pilots, who pilot ships between Pilottown and New Orleans; and shift pilots, who move ships within the Port of New Orleans. They are assigned to ships in the order in which their names appear on the pilot slate maintained by the dispatcher. The first five listed pilots on the slate are notified of their positions and must be ready at any time to receive an assignment. Shift pilots must be available for assignments either in person or by telephone at any time. A pilot does not know where his next assignment will be. He might receive an assignment from the dispatcher at any time of the day or night, including holidays. Pilots generally receive notice of assignments about 1 to 2 hours in advance of the time they are to report to the ship, but in some instances 2 1/2 to 3-hours' notice is given. Shift pilot assignments are usually in the early morning or late in the day, because ship operators prefer to have the ships available for loading by longshoremen during regular working hours in order to pay as little overtime as possible.

The association itself furnishes transportation to its pilots in some instances as, for example, to or from Pilottown and Southport. Furthermore, between the hours of midnight and 6 a.m. the association furnishes its pilots transportation to certain specified docks and wharves. In a large number of instances in 1953 and 1954 the petitioner was thus furnished transportation to certain specified docks and wharves.

There remained, however, a large number of docks and wharves to and from which the petitioner found it necessary to furnish his own transportation. During the years in question petitioner was working principally as a shift pilot, although he did make some trips as a route pilot, and was on call for either type of duty at all times.

When not furnished transportation by the association or by the shipowner, the petitioner customarily used his own automobile to travel to places of assignments and back to his residence and to travel from one assignment to another. There is no convenient public transportation to many of the docks. His custom was to drive to the dock to which a ship was to be moved in order to determine whether the berth was obstructed as, for example, by a barge. He would then drive to the dock where the ship was moored and usually arrange with the clerk representing the ship or a linesman to drive the car to the ship's new location. After completing an assignment petitioner was required to contact the dispatcher as soon as possible for further assignment. He might be assigned directly to another ship in which case he would proceed directly to the new assignment. There might be no immediate assignment in which case the petitioner might go to his home or to the association office. The petitioner is not required to be at his residence or any other particular place to receive assignments. He was permitted, but not required, to wait at the association office, and at times he did go to the office and receive assignments.

During 1953 the petitioner worked about 270 days and had about 480 piloting assignments. These were principally shift assignments although he had numerous route assignments. During that year there were about 150 days on which he had more than one assignment. In accordance with the policy of the association the petitioner was furnished his transportation to and from Pilottown and certain other points. In addition, ship operators furnished transportation to about 60 of petitioner's assignments and from about 90 of his assignments. In 1953 petitioner was not reimbursed for any transportation.

During 1954 petitioner worked about 290 days and had about 430 piloting assignments. These also were principally shift assignments but included numerous route assignments. During that year there were about 110 days on which the petitioner had more than one assignment. In...