Keller v. Commissioner
| Decision Date | 27 June 1996 |
| Docket Number | Docket No. 1284-95. |
| Parties | Theodore W. Keller v. Commissioner. |
| Court | U.S. Tax Court |
COUVILLION, Special Trial Judge:
This case was heard pursuant to section 7443A(b)(3)1 and Rules 180, 181, and 182.
Respondent determined a deficiency of $2,996 in petitioner's Federal income tax and an accuracy-related penalty under section 6662(a) in the amount of $599 with respect to petitioner's 1991 tax year.
The issues for decision are: (1) Whether certain educational expenses incurred by petitioner constitute nondeductible travel expenses for education under section 274(m)(2), and (2) whether petitioner is liable for the accuracy-related penalty under section 6662(a).
Some of the facts were stipulated. Those facts, with the annexed exhibits, are so found and are incorporated herein by reference. At the time the petition was filed, petitioner's legal residence was in the State of California.
During the year at issue, petitioner was employed as a professor of international relations by San Francisco State University at San Francisco, California (the University). The department of international relations at the University is part of the School of Behavioral and Social Sciences. Petitioner began his employment with the University in the fall of 1964, having a bachelor of arts degree in psychology and master and doctorate degrees in political science. After the year at issue, petitioner retired in October 1992 as professor emeritus.
As petitioner described it at trial, the academic field of international relations mainly involves international politics and encompasses social, economic, political, and cultural relations among nations. As a professor of international relations, petitioner was interested in and focused on the theory of international politics, such as what makes nations do what they do, why nations take such positions, and theories of revolution, counterrevolution, and war. Approximately every 7 years, professors at the University in this field of academics were expected, although not required, to travel to a foreign country to learn more about their field of study. Petitioner took two such trips, both to France, during the 1976-77 and the 1983-84 academic years. The third trip he took, to Spain, during the 1990-91 academic year, gives rise to this litigation.
Sometime during 1990, petitioner applied with the University for a "Difference In Pay" leave for the 1990-91 academic year, which was approved. At trial, the parties referred to the leave as a sabbatical leave. During this leave period, petitioner was paid one-half his regular salary. Between August 1990 and until July 25, 1991, petitioner was in Madrid, Spain, except for 2 weeks at Christmas during 1990 and 4 days in the spring of 1991.
In his application for the sabbatical, petitioner was required to briefly describe what activity he proposed to engage in during his leave. Petitioner stated on his application that he would focus on the "post-industrial era" and "write a book-length * * * essay on this subject, exploring how and why post-industrial society's socio-economic political consciousness will differ from our own". He stated further in his application that approximately half of his research for the proposed manuscript was already completed, and he continued:
Partly for economic reasons, partly to get a change of pace, I intend to go abroad to do the writing. My last sabbatical was spent in Paris and I managed to take an hour a day of conversational French as well as write MARX'S TRUTH AND ITS CONSEQUENCES. I am considering going to Spain this time and attempting to learn a bit of Spanish.
The manuscript referred to was initially begun by petitioner on one of his earlier sabbaticals in France. For the planned sabbatical, petitioner testified at trial "my intention was to go to Spain and to talk to other people in Spain from elsewhere in Europe about that subject". After arriving in Spain in August 1990, petitioner resumed work on the manuscript and completed a draft that he sent to another professor at the University, who at one time was chairman of the international relations department, Dr. Henry E. McGuckin, Jr. Dr. McGuckin reviewed the draft manuscript and advised petitioner: Apparently heeding Dr. McGuckin's advice, petitioner did no further work on the manuscript and decided to focus his attention on something else. At that time, the military involvement of the United States in the area of the Persian Gulf was just beginning, occasioned by the invasion of Kuwait by Iraq. Petitioner decided that he would redirect his efforts to a study of the Persian Gulf situation primarily from the European perspective as viewed from Spain. As petitioner envisioned the situation, the European perspective was that the United States had "set up" Iraq through its leader, Saddam Hussein, to attack Kuwait, after which the United States would thereby be justified in proceeding with military action, which would result in the United States solidifying control of the Persian Gulf and the attendant oil resources of that area of the world. The remainder of petitioner's sabbatical leave, therefore, was devoted to this subject and resulted in petitioner's writing a five-act play dealing with the Persian Gulf situation. Petitioner returned to the United States on July 25, 1991, and resumed his professorship at the University upon conclusion of his sabbatical leave. The five-act play, which he wrote while in Spain, was published and was utilized by petitioner in his international relations courses at the University.
On his Federal income tax return for 1991, petitioner claimed on Schedule A, Itemized Deductions, a deduction of $13,505 for job expenses and other miscellaneous deductions. This amount included the following expenses attributable to petitioner's travel to Spain during 1991, related to his sabbatical leave:
$ 202 Vehicle expenses
48 Parking fees
7,610 Sabbatical expenses
$ 791 Air bus, etc
593 Shipping, passports
254 Local transportation
4,486 Lodging
1,318 Utilities
168 Utilities
2,874 Meals (80 percent of actual amount)
_______ Total (prior to deduction of 2 percent of
$10,734 adjusted gross income under sec. 67(a))
In the notice of deficiency, respondent disallowed the $10,734 on the ground that "no deduction is allowed for costs of travel that constitutes a form of education". At trial, respondent agreed that petitioner had incurred the amounts claimed but contended that such expenses were not allowable deductions under section 274(m)(2).
Deductions are strictly a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any deductions claimed. Rule 142(a); New Colonial Ice Co. v. Helvering [4 USTC ¶ 1292], 292 U.S. 435, 440 (1934); Welch v. Helvering [3 USTC ¶ 1164], 290 U.S. 111 (1933).
Section 162(a) permits a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Such expenses generally include expenditures for travel while away from home in the pursuit of a trade or business. The word "travel" includes meals and lodging. Sec. 162(a)(2).
Prior to 1987, section 1.162-5(d), Income Tax Regs., specifically provided that an individual traveling away from home primarily for educational purposes could properly deduct expenditures for travel, including meals, and lodging under section 162. However, in the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2118, section 142(b) of that act expressly overruled section 1.162-5(d), Income Tax Regs. In particular, section 142(b) of the Tax...
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