Muhl v. Commissioner, Docket No. 3580-84.
| Decision Date | 24 July 1986 |
| Docket Number | Docket No. 3580-84. |
| Parties | James F. Muhl and Bobbie L. Muhl v. Commissioner. |
| Court | U.S. Tax Court |
Donald C. McLeaish, for the petitioners. Marty J. Raisanen, for the respondent.
Memorandum Findings of Fact and Opinion
The Commissioner determined deficiencies in the petitioners' Federal income taxes of $2,613.49 for 1979 and $3,315.11 for 1980. The issues remaining for decision are whether Mr. Muhl's traveling expenses were incurred while away from home and deductible under section 162(a)(2) of the Internal Revenue Code of 1954,1 and whether his transportation expenses between the Houston area and Waco are ordinary and necessary business expenses rather than personal expenses.
Some of the facts have been stipulated, and those facts are so found.
The petitioners, James F. Muhl and Bobbie L. Muhl, maintained their legal residence in Waco, Tex., at the time of filing their petition in this case. They filed their joint Federal income tax returns for 1979 and 1980 with the Internal Revenue Service Center, Austin, Tex. Mr. Muhl will sometimes be referred to as the petitioner.
In 1945, Mr. and Mrs. Muhl purchased 28 acres in Waco, Tex., and began operating a dairy farm. In 1955, they sold this property and moved their dairy farm to their present location where they purchased 256 acres for $80 per acre. In 1957, the petitioners were forced to sell much of their dairy cattle because of a severe drought; thereafter, they began raising feed cattle.
Since the only water available at that time was stored in cisterns, which were inadequate for the farm's needs, the petitioners sought an alternative. Mr. Muhl went to the Farmers Home Administration and was instrumental in obtaining a loan in 1958 for an artesian well which would supply water to the petitioners' farm and the surrounding area. As a result, H & H Water Supply Corporation was organized. At first, the petitioners volunteered their time: they read meters, and Mr. Muhl was the secretary and treasurer. Eventually, Mrs. Muhl became a paid employee. As a board member of the water company, Mr. Muhl was required to attend meetings once a month, and he also engaged in electrical work for it; in 1980, he earned $2,100 for maintenance of the electrical pumps for the water system.
The petitioners' principal reason for purchasing the property was to operate it as a farm, but over the years, they developed a business of constructing houses on parcels of the property and selling them. During 1965, the petitioners sold a parcel of 22 acres with a three bedroom, two bath house for $17,000 and a parcel of 11 acres for $2,750. In 1974, they sold a parcel of 7 acres with a house for $17,500. In 1975, the petitioners bought 11 acres for $12,500. In 1976, they sold 20 acres for $14,000. During 1977, the petitioners sold 15 acres with a four bedroom, two bath house for $49,000 and made a gift of several acres to one of their daughters.
Since 1940, the petitioner has also worked as an electrician. He is a member of the International Brotherhood of Electrical Workers. Since he could not find work as an electrician in Waco, the petitioner moved his union local card in 1977 from Waco to Houston to get his name in the "first book" and increase his chances of obtaining job assignments in the Houston area. He continued to maintain a travelers card at the Waco local in order to remain eligible for assignments in the Waco area. One week after having transferred his card to the Houston local, the petitioner obtained work in the Houston area. In November 1977, the petitioner left that project to accept an assignment at Tom Cuff Electric in Waco, and he remained there until the completion of the job in February 1979. At that time, the petitioner again attempted to find work as an electrician in Waco but was unsuccessful.
On March 7, 1979, the petitioner accepted employment with Ebasco Services, Inc. (Ebasco), on a project for construction of Unit No. 7 for Houston Power and Light. The project was near Rosenburg, Tex., 40 miles from Houston and approximately 200 miles from Waco. At the time he commenced work on the project, the petitioner, who was then approximately 61 years of age, was told that Unit No. 7 was scheduled to be completed in 15 to 18 months. The petitioner was laid off for a 1-week period in June 1980 because of a labor dispute between Houston Power and Light and the local union. In March 1980, actual construction of Unit No. 8, adjacent to Unit No. 7, was begun by Ebasco; and on July 16, 1980, upon completion of Unit No. 7, the petitioner was transferred to Unit No. 8, which was scheduled to be completed in February 1983. On May 9, 1981, the petitioner voluntarily left the Ebasco project and accepted a 6-month assignment at a different project, which was approximately 45 miles outside of Houston, and slightly closer to Waco, and at which he worked a 4-day week. Later, he accepted a 2-week assignment with Shea & Shea in Houston. On November 30, 1981, he returned to the Ebasco project and remained there until the electrical work was completed in December 1982.
On their Federal income tax returns, the petitioners reported that Mr. Muhl received wages from Ebasco of $27,950.20 for 1979 and $34,094.35 for 1980. They deducted as traveling expenses $7,552 for 1979 and $6,193 for 1980. These deductions included the costs of meals and lodging while Mr. Muhl worked in the Houston area and the costs of his driving to and from Waco each week. The petitioners also deducted as losses from the operation of their farm $5,875.00 in 1979 and $5,186.00 in 1980.
In his notice of deficiency, the Commissioner disallowed the deductions for traveling expenses on the ground that Mr. Muhl's employment with Ebasco was indefinite rather than temporary. He also disallowed the farm losses on the ground that the farm was not operated for profit. The parties now agree that if the petitioners are entitled to deduct traveling expenses, the amounts of such expenses are $7,072.72 for 1979 and $6,193.00 for 1980. The Commissioner now agrees that the farm was operated for profit, and the parties have agreed that the allowable losses are $1,143.00 for 1979 and $1,363.61 for 1980.
OpinionPersonal, living expenses are ordinarily non-deductible. Sec. 262. However, section 162(a)(2) allows a taxpayer to deduct certain living expenses paid or incurred while away from home in the pursuit of a trade or business, if (1) the expenses are reasonable and necessary, (2) they are incurred while away from home, and (3) they are incurred in the pursuit of business. Commissioner v. Flowers 46-1 USTC ¶ 9127, 326 U.S. 465, 470 (1946). The purpose of the deduction under section 162(a)(2) is "to mitigate the burden of the taxpayer who, because of the exigencies of his trade or business, must maintain two places of abode and thereby incur additional and duplicate living expenses." Kroll v. Commissioner Dec. 28,864, 49 T.C. 557, 562 (1968); James v. United States 59-2 USTC ¶ 9618, 176 F.Supp 270, 272 (D. Nev. 1959), affd. 62-2 USTC ¶ 9735 308 F.2d 204 (9th Cir. 1962). Since the amount of the traveling expenses incurred by the petitioner is not in dispute, the deductibility of such expenses depends upon whether the petitioner was "away from home" within the meaning of section 162(a)(2).
When a taxpayer with a well established tax home accepts employment away from his home, his living expenses are deductible if such employment is temporary or of short duration because it would not be reasonable to expect him to move his home under such circumstances. Commissioner v. Peurifoy, 57-2 USTC ¶ 10,045, 254 F.2d 483, 486 (4th Cir. 1957), revg. Dec. 21,993 27 T.C. 149 (1956), affd. per curiam 58-2 USTC ¶ 9925 358 U.S. 59 (1958); Tucker v. Commissioner Dec. 30,657, 55 T.C. 783, 786 (1971); Michaels v. Commissioner Dec. 29,836, 53 T.C. 269 (1969). However, if the taxpayer travels for a period expected to be indefinite, his expenses are not deductible; in that event, the law considers that he should move his home to the new place of employment and that his traveling from his former home is not required by his business but by his personal choice to continue to live there. Commissioner v. Flowers, supra.
Temporary employment is generally defined as the kind of employment whose termination can be foreseen within a fixed or short period of time. Albert v. Commissioner Dec. 17,111, 13 T.C. 129, 131 (1949). In addition to the expected length of employment, all the facts and circumstances must be considered in deciding whether the petitioner should be expected to move his home from Waco to Houston for tax purposes. Tucker v. Commissioner, 55 T.C. at 786; Albert v. Commissioner, supra. It is a well settled principle that employment which is originally temporary may become indefinite or permanent due to changed circumstances or simply by the passage of time. Norwood v. Commissioner Dec. 33,877, 66 T.C. 467, 470 (1976); Kroll v. Commissioner, 49 T.C. at 562; Garlock v. Commissioner Dec. 24,256, 34 T.C. 611, 616 (1960). By indefinite employment, we mean that employment with respect to which the actual termination date cannot be anticipated but which is expected to last for...
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