Sibla v. C. I. R.

• Decision Date: 07 January 1980
• Docket Number: 77-3815,Nos. 78-1295,s. 78-1295
• Citation: 611 F.2d 1260
• Parties: 80-1 USTC P 9143 Richard R. SIBLA, Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant. Robert E. COOPER, Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1260

611 F.2d 1260

80-1 USTC P 9143

Richard R. SIBLA, Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.

Robert E. COOPER, Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.

Nos. 78-1295, 77-3815.

United States Court of Appeals Ninth Circuit.

Jan. 7, 1980.

Robert E. Radke, Van Nuys, Cal., for Commissioner of Internal revenue.

John B. Furay, Lewis & Marenstein, Los Angeles, Cal., for respondent-appellant.

James A. Riedy, Washington, D. C., for Robert E. Cooper; M. Carr Furguson, Washington, D. C., on brief.

John B. Furay, Los Angeles, Cal., amicus curiae.

Richard R. Sibla, pro se.

Appeal from the Decision of the United States Tax Court.

Before KENNEDY and TANG, Circuit Judges, and CURTIS, ^* District Judge.

CURTIS, District Judge:

We have before us two appeals from decisions of the tax court upon nearly identical fact situations, the difference between them being of no relevance on this appeal. A single opinion therefore seems appropriate for the disposition of both.

These appeals involve an attempt by the taxpayers to deduct from their respective incomes their share of expenses of a mandatory organized mess at the firehouse where they were stationed. The tax court decided in favor of the taxpayers and the Commissioner has appealed.

The relevant facts are largely undisputed.

FACTS

During the relevant period the taxpayers were employed as firemen by the Los Angeles Fire Department and were assigned to Fire Station No. 89 in North Hollywood, California. They normally worked 24-hour shifts and were not permitted to leave the fire station on personal business while on duty.

In the late 1950's a desegregation plan was implemented by the Fire Department. Previously segregated posts were consolidated in order to eliminate segregation within a post. The Board of Fire Commissioners adopted rules requiring all firemen at each fire station to participate in a nonexclusionary organized mess at the station house, unless officially excused. The only recognized grounds for nonparticipation was a physical ailment verified by the city's own examining physician.

The Fire Department provided kitchen facilities, but the firemen themselves generally organized the activities themselves they provided dishes and pots, purchased and prepared the food, assessed members for the cost of the meals and collected the assessments. Meal expenses averaged about $3.00 per man for each 24-hour shift which the taxpayers were required to pay even though they were at times away from the station on fire department business during the mess period.

In 1973, the appellant Sibla deducted his total payments for the year. The appellant Cooper deducted the amounts he had paid into the organized mess expense in the years 1972 and 1973. Both appellants claim the deduction as an ordinary and necessary business expense under section 162(a) of the Internal Revenue Code of 1954 (26 U.S.C. § 162(a)). In both cases the Commissioner disallowed the deduction as a non-deductible personal expense. The Commissioner was overruled, but by a divided court. The majority consisting of seven judges allowed the deduction under section 162(a). A concurring opinion written by Judge Simpson,

although allowing the deduction, chose to do so under the provisions of section 119 (26 U.S.C. § 119) and would have disallowed it under section 162(a). The concurring opinion was signed by five other judges, two judges dissented.

ISSUE ON APPEAL

The issue on appeal therefore is "whether the tax court erred in holding that taxpayer's share of the expenses of the organized mess at the firehouse was deductible under section 162(a) or section 119 of the Internal Revenue Code of 1954." We hold that such expenses are both deductible under section 162(a) and excludable under section 119.

BUSINESS EXPENSE DEDUCTION UNDER § 162

Section 162(a) provides a deduction for all the "ordinary and necessary expenses paid or incurred . . . in carrying on any trade or business, . . ."

Section 262 of the Internal Revenue Code of 1954 provides: "Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses."

The Commissioner argues that an expense is "personal" rather than "business" if it is personal in character and could be incurred whether or not the taxpayer engaged in business activity. An expense for meals or groceries is generally considered a nondeductible personal expense. Here the taxpayer would have incurred a similar expense whether or not he ate at work. Consequently, the Commissioner contends the fact that the taxpayer incurred the expense while at work does not change the personal character of the expenditure.

In allowing the deduction, Judge Fay speaking for the majority observed initially that:

"(M)any expenditures possess both personal and business attributes. In these situations placement of that often thin line which distinguishes a 'personal expense' from a 'business expense' depends primarily upon the facts and circumstances of each particular case. Cf. Robert J. Kowalski, 65 T.C. 44, 63 (1975) (Drennen, J., concurring and dissenting), Revd. 544 F.2d 686 (3d Cir. 1976). For example, Rev.Rul. 75-316, 1975-2 C.B. 54, provides in part as follows:

'The fact that a particular expense may under certain circumstances be a nondeductible personal expense does not preclude the deduction of such an expense as an ordinary and necessary business expense under other circumstances.' "

As the tax court has indicated, that which may be a personal expense under some circumstances can, when circumscribed by company regulations, directives, and conditions, lose its character as a personal expense and take on the color of a business expense. Recognizing the "unusual nature of petitioner's employment, the involuntary nature of the expense incurred, petitioner's limited ability to physically participate in the mess, and his employer's lack of intent to compensate or otherwise benefit petitioner for enacting the requirement, . . ." the court said, "upon consideration of the entire record, . . . we find that the amounts in issue constitute business expenses rather than personal expenses."

In reaching such a determination, we consider that the tax court has exercised that degree of special expertise which Congress has intended to provide in that tribunal, and that this court should not overrule that body, unless some unmistakable question of law mandates such a decision. As the Supreme Court said in Commissioner v. Heininger, 320 U.S. 467, 475, 64 S.Ct. 249, 254, 88 L.Ed. 171 (1943):

"Whether an expenditure is directly related to a business and whether it is ordinary and necessary are doubtless pure questions of fact in most instances. Except where a question of law is unmistakably involved a decision of the Board of Tax Appeals on these issues, having taken into account the presumption supporting the Commissioner's ruling (footnote omitted), should not be reversed by the federal appellate courts (footnote omitted). Careful adherence to this principle will result in a more orderly and uniform system of tax deductions in a field necessarily beset by innumerable complexities." 320 U.S. at 475, 64 S.Ct. at 254.

The tax court's finding that the taxpayer's mess expenses qualify as an "ordinary and necessary business expense" is a finding of fact which is well supported by the evidence in the record before us and should be accepted.

Those judges who dissented from this view express the fear that, "If a deduction is allowed under section 162(a) for this personal expenditure, we may be launched down a slippery slope, and it may be difficult to find a rational basis for drawing a line in other cases involving personal expenditures." Although we recognize the court's concern, we do not consider the task so difficult as to justify abdicating what we believe is the court's duty to try to find the congressional intent in these complex statutes. The tax laws are shot through with instances in which courts are called upon to make delicate factual assessments and interpretive decisions in areas where rational distinctions are difficult to establish. And we think the task of doing so here is no greater than that often encountered by courts working in this field of the law.

The Commissioner cites Stiner v. United States, 524 F.2d 640 (10th Cir. 1975), where the court refused to allow a deduction for the cost of a uniform where the clothing was suitable for ordinary wear. In a very brief opinion, the Stiner court based its affirmance of the directed verdict of the district court on the fact that "no evidence was produced at trial which in our opinion established that the items in question (shoes, boots, gloves, furs, and cosmetics) were unusual or unique and not adaptable to the general usage as ordinary clothing." 524 F.2d at 641. On the contrary, the tax court below found the taxpayer's situation here to be both "unusual" and "unique," and considering the entire record, found that the amounts in issue constituted business expense rather than personal expense. The Stiner case is clearly distinguishable on its facts.

In Pevsner v. Commissioner, --- T.C. --- (1979), reported in 48 U.S.L.W. 2200 (Sept. 18, 1979), the tax court allowed a deduction under section 162(a) for the cost of clothes that were useful only in the workplace. The taxpayer there was required to purchase high fashion designer clothes for her job which, although suitable for general wear, did not appeal to the taxpayer for general wear, she preferring a simple lifestyle to which such clothes were not suitable.

In support of its contention that the cost of meals is a personal expense not deductible under section 162(a), the Commissioner cites James v. United States, 308 F.2d 204 (9th Cir. 1962) and LaForge v. Commissioner, 434 F.2d 370 (2d Cir. 1970). Both cases are so dissimilar on the facts with which w...