Shore v. Commissioner
| Citation | 1990 TC Memo 272,59 TCM (CCH) 762 |
| Decision Date | 31 May 1990 |
| Docket Number | Docket No. 31001-88. |
| Parties | James R. Shore v. Commissioner. |
| Court | U.S. Tax Court |
James R. Shore, pro se. Mark I. Siegel, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent, in his notice of deficiency issued on September 14, 1988, determined the following deficiencies in, and additions to, petitioner's 1984 and 1985 Federal income tax:
Section Section Section
Year Deficiency 6653(a)(1)1 6653(a)(2) 6661
1984 ................. $8,045.24 $402.26 * $2,011.31
1985 ................. $8,551.46 $427.57 * $2,137.87
* Fifty percent interest on the portion of the deficiency attributable to negligence
The deficiencies determined by respondent are due in large part to the disallowance of business expenses attributable to petitioner in 1984 and 1985. After concessions, the issues for our decision are (1) whether petitioner was "away from home" within the meaning of section 162(a)(2) and therefore entitled to deductions for travel expenses (including meals, lodging, and automobile expenses) as claimed on his 1984 and 1985 tax returns; (2) whether petitioner is entitled to claim a rental deduction of $3,000 for storage of documents in 1984 and 1985 respectively; (3) whether petitioner is liable for additions to tax due to negligence under section 6653(a)(1) and (2); and (4) whether petitioner is liable for additions to tax under 6661 for substantial understatement of his income tax for the years 1984 and 1985.
Some of the facts have been stipulated and are found accordingly. The stipulation of facts and accompanying exhibits are incorporated herein by this reference. At the time the petition was filed in this case and during the years in issue petitioner James R. Shore resided in Belding, Michigan (hereinafter Belding), located approximately 150 miles from Detroit, Michigan (hereinafter Detroit).
Petitioner first moved to Belding as a child in 1949 when his parents bought the Gambles dime store. After finishing high school in Belding, he joined the military in 1954 and moved out of town. In approximately 1969, petitioner moved back to Belding. While continuing to reside in Belding, he worked for one year as a draftsman in Greenville, Michigan; for ten years as a furniture designer in Grand Rapids, Michigan; and for six years as project engineer with an industrial equipment company in Belding. Petitioner then became a self-employed industrial designer drawing his clients from Detroit, Grand Rapids, and Belding. In 1982, petitioner began working steadily as a freelance automotive designer in the greater Detroit metropolitan area exclusively. Although Belding is 150 miles away from Detroit, petitioner continued to maintain his residence in Belding. He did, however, rent an apartment in Detroit for his use on weekdays. He drove back to Belding nearly every weekend.
As an automotive designer, petitioner worked for a series of contract companies who hired him to design a wide range of complex vehicle parts for well-known car manufacturers including Cadillac, Ford, and Isuzu. By 1984, petitioner was a skilled designer having had experience designing such things as exhaust and fresh air cooling systems, fuel filters, power steering mechanisms, and the hydraulics of a military tank. It is customary for freelance automotive designers to be laid off when their particular design projects are completed. The automobile design assignments petitioner worked on from June 1982 to December 1985 generally lasted between 2 to 20 months. His employment history since 1982 is shown as follows.
EmployerBeginningEndWages
Pioneer Engineering
Warren, MI** ............... June 1982 Nov. 1983 $67,882
Engineering Tech
Troy, MI** ................. Nov. 1983 Jan. 1984 $14,280
Modern Engineering
Troy, MI ........................ Feb. 1984 April 1984 $ 7,463
Troy Design
Troy, MI ........................ April 1984 Dec. 1985 $67,057
Sheller Globe,
Detroit, MI ..................... Dec. 1985 Dec. 1986 $96,335
Aero Detroit,
Troy, MI ........................ Dec. 1986 May 1987 $ 2,674
Pioneer Engineering,
Warren, MI ...................... May 1987 Feb. 1990 --
** (Warren, Michigan and Troy, Michigan are both located within the greater Detroit
metropolitan area.
On his 1984 tax return, petitioner claimed a travel deduction of $11,508 for temporary living expenses in Detroit (274 nights at $42.00 per night), and car and truck expenses of $3,753.70. On his 1985 tax return, petitioner claimed a travel deduction of $11,088 for temporary living expenses (264 nights at $42 per night), and car and truck expenses of $3,700. At no time has petitioner presented any documentation to support these automobile and living expense deductions.
On his 1984 and 1985 income tax returns, petitioner deducted $3,000 for the rent of a home "office" ($250 per month) in which petitioner stored design blueprints and other work-related documents. Petitioner's purported "office" is located in an unfinished room adjoining his basement. The room is small, measuring five feet by ten feet. At trial petitioner presented monthly rent receipts for the $3,000 annual office deduction and two snapshots. The handwritten receipts were dated, signed by the purported landlord, and inscribed with various memorandums such as "Rent-January," "March Occupancy," "May Office Rental," and "storage space."
OpinionPetitioner seeks to deduct as ordinary and necessary business expenses the amounts he spent in driving between Belding, Michigan and Detroit on weekends, as well the living expenses he incurred while working in the Detroit area in 1984 and 1985. Section 162(a)(2) allows a deduction for travel expenses, including meals and lodging which are not lavish or extravagant, "while away from home in the pursuit of a trade or business." The purpose behind the deduction is to allow a taxpayer relief from the additional or duplicate expenses incurred while away from home on business. Brandl v. Commissioner 75-1 USTC ¶ 9414, 513 F.2d 697, 699 (6th Cir. 1975), affg. a Memorandum Opinion of this Court Dec. 32,645(M); Bochner v. Commissioner Dec. 34,260, 67 T.C. 824, 827 (1977). Thus, one of the conditions that must be satisfied before a deduction is allowed for travel expenses under section 162(a)(2) is that the taxpayer must show that they were incurred "while away from home." Commissioner v. Flowers 46-1 USTC ¶ 9127, 326 U.S. 465 (1946), rehearing denied 326 U.S. 812 (1946).
This Court has consistently held that for purposes of section 162(a)(2), "home" means the taxpayer's principal place of business or employment. Michaels v. Commissioner Dec. 29,836, 53 T.C. 269, 273 (1969); Whitaker v. Commissioner Dec. 21,152, 24 T.C. 750 (1955). It is well established that if a taxpayer elects for personal reasons to reside far from his place of employment, the expense in driving to and from work and the cost of meals and lodging at his place of employment are nondeductible personal expenses. Sec. 262. Similar expenses incurred while employed away from home temporarily are deductible traveling expenses within the meaning of section 162(a)(2). It would be unreasonable to expect petitioner to move his residence to a temporary work location. Tucker v. Commissioner Dec. 30,657, 55 T.C. 783 (1971). However, if temporary employment ripens into employment of substantial or indefinite duration, the situs of such employment becomes petitioner's "tax home" for purposes of the statute, and the travel expenses incurred there are not deductible. Commissioner v. Peurifoy 57-2 USTC ¶ 10,045, 254 F.2d 483 (4th Cir. 1957), affd. 58-2 USTC ¶ 9925 358 U.S. 59 (1958); Norwood v. Commissioner Dec. 33,877, 66 T.C. 467, 470 (1976). Thus, the first issue for our decision is whether petitioner has carried his burden of proving that his employment in the metropolitan area of Detroit during the years 1984 and 1985 was "temporary" as opposed to "indefinite." Rule 142(a).
Petitioner contends that the work he did on each design project constituted a separate and distinct temporary job and thus his "home" for tax purposes was in Belding, Michigan, throughout the years in issue. In support of his position, petitioner maintains that prior to and during the years in issue he worked for a series of different companies on separate, "short-term" employment contracts, all of which lasted only 2 to 20 months. In 1984 and 1985 alone, petitioner worked under four different design contracts for four different companies— Engineering Tech., Modern Engineering, Troy Design, and Sheller Globe.
We do not agree that petitioner's employment in Detroit was temporary. The fact that petitioner worked for four different companies in Detroit within two years is not determinative of whether his employment in Detroit was temporary. Instead, the proper inquiry is whether petitioner's employment in the Detroit area should have been expected to continue indefinitely so that "it would be reasonable under the circumstances * * * for petitioner to move to the location of his new employment." Markey v. Commissioner 74-1 USTC ¶ 9192, 490 F.2d 1249, 1253 (6th Cir. 1974); Commissioner v. Mooneyhan 69-1 USTC ¶ 9106, 404 F.2d 522, 527 (6th Cir. 1968); Tucker v. Commissioner, supra. To qualify for his claimed business deductions under the temporary-indefinite rule, petitioner must prove that it was reasonable under the circumstances to have expected at the beginning of each taxable year that his employment in Detroit would be temporary. Commissioner v. Peurifoy, supra; Rule 142(a).
We are persuaded from the record that petitioner, at the beginning of 1984, and at the beginning of 1985, should have reasonably expected to continue working in Detroit as an automotive...
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