Turner v. Comm'r of Internal Revenue
| Decision Date | 08 April 1971 |
| Docket Number | Docket No. 4374-68. |
| Citation | 56 T.C. 27 |
| Parties | WILLIAM B. TURNER, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
William B. Turner, pro se.
Marvin A. Fein, for the respondent.
During 1966 petitioner was a temporary corporate employee who daily traveled considerable distances by automobile to work and home again. Held, petitioner is a commuter, and his transportation expenses are not deductible under either sec. 162(a) or sec. 162(a)(2), I.R.C. 1954.
Respondent determined a deficiency in the petitioner's Federal income tax for the taxable year 1966 in the amount of $946.08. In addition, the pleadings were deemed amended to conform with evidence submitted at trial which would result in an increased deficiency if we hold in favor of the respondent on all issues.
The issues presented for decision are (1) whether the petitioner, a temporary corporate employee, is entitled to deduct automobile expenses in traveling to work and home again as ordinary and necessary business expenses, and (2) whether a travel allowance received by the petitioner is includable in his gross income.
The evidence in the instant case consists of testimony and exhibits received at trial.
William B. Turner (herein called petitioner) resided in Brooklyn, New York, at the time he filed his petition in this case. Petitioner filed his Federal income tax return for the year 1966 on a calendar year basis with the district director of internal revenue, New York, N.Y.
During 1966, the petitioner resided in Brooklyn, New York, and was employed as a consultant engineer. He obtained employment in the manner described below.
The petitioner was registered with Lehigh Design Co. (Lehigh), Bronx, New York, a ‘job shop’ that supplied personnel to companies that held Government contracts. Through Lehigh, the petitioner was sent to the Kollsman Instrument Corp. (Kollsman Instrument) in Syosset, N.Y.
He reported to work at the Kollsman Instrument plant in Syosset and worked under the direction and control of Kollsman Instrument from June 1965 through September 1966. The petitioner testified that during that 16-month period he ‘was assigned to do different engineering * * * on various government contracts.’
The petitioner was also registered with another ‘job shop,‘ Volt Technical Services (Volt), New York, N.Y. The payroll manager of Volt testified (hat Volt supplied employees to companies for a specific project or Government contract. Through Volt, the petitioner was sent to Norden Division of United Aircraft Corp. (Norden Division) in Norwalk, Conn.
He reported to work at the Norden Division plant in Norwalk and worked under the direction and control of the Norden Division from October 1966 through May 1967. The petitioner began this 8-month period of employment under a purchase order for his services that provided that the Norden Division agreed to purchase his services at a straight time rate of $12.10 per hour for a 40-hour week and overtime rate of $16.98 per hour, total cost not to exceed $9,500. The $9,500 limitation was reached at some point early in 1967 at which time this purchase order was apparently replaced with another of similar terms. In any event, the petitioner worked under a new agreement until May 8, 1967.
In addition to a stated hourly rate for the petitioner's services, the purchase order entered into between Norden Division and Volt provided that the petitioner was to receive a travel allowance of 75 cents per hour for the first 8 hours in any 1 day for a maximum of 40 hours per week, i.e., $30 per week. For the period from October through December 1966 the petitioner's travel allowance totaled $330.
When the petitioner took the job at the Norden Division, he did not know how long he would be employed, although he knew that it was not a permanent job. During the period in which the petitioner worked for both Kollsman Instrument and the Norden Division, he never had more than a 6-month employment commitment.
The petitioner only visited the offices of Lehigh and Volt at the beginning of his period of employment in Syosset and Norwalk. The petitioner received his pay checks from Lehigh and Volt but otherwise had no contact other than some telephone calls from those ‘job shops.’ New York City income taxes were withheld from the petitioner's pay by both Lehigh and Volt.
The petitioner could have obtained employment by going directly to Kollsman Instrument or the Norden Division but chose to go through Lehigh and Volt so as to obtain a higher salary than was available under direct employment. Although they had to pay the petitioner a higher salary, Kollsman Instrument and Norden Division were willing to employ the petitioner through the job shops, as they did not have to provide him with any fringe benefits.
The petitioner drove his automobile on the average of 6 days a week to and from his resident to either Syosset or Norwalk. Using a commonly traveled route, the one-way distance from the petitioner's residence to the Kollsman Instrument plant in Syosset was 36 miles and to the Norden Division plant in Norwalk was 60 miles. Total mileage driven by the petitioner in 1966 between his residence and the Kollsman Instrument and Norden Division plants equaled 16,800 and 8,640 miles, respectively.
In his return for 1966, the petitioner claimed total transportation expenses of $2,963.40. This claimed deduction resulted from the petitioner's conclusion that he traveled 30,240 miles between his residence and the Kollsman Instrument and Norden Division plants and that he was entitled under the respondent's administrative rules to a deduction of 10 cents per mile for the first 15,000 miles ($1,500) and 7.5 cents per miles for the balance (incorrectly computed as $1,305). The additional $158.40 of the claimed $2,963.40 represented claimed road and bridge tolls. The petitioner failed to include the $330 travel allowance he received during 1966 in his gross income.
OPINIONThe petitioner is a temporary worker. A consultant engineer by trade, he prefers a series of short-term jobs to more permanent employment. During 1966 he worked for the Kollsman Instrument Corp. in Syosset, N.Y., and for the Norden Division of United Aircraft Corp. in Norwalk, Conn. Both of these corporations had Government contracts which necessitated the use of temporary workers such as the petitioner.
Defense contractors and other businesses of seasonal or cyclical nature commonly use temporary help at time of peak business activity. ‘Job shops' like Volt Technical Services and Lehigh Design Co., with whom petitioner was registered, are in the business of supplying temporary personnel. In the instant case petitioner was nominally the employee of the job shops, which in turn sold his services to the client corporations. This arrangement provides personnel flexibility to the client company, since it need not go through normal hiring and firing procedures. Also, it need not incur costly fringe benefits applying to permanent employees. The temporary employee often receives higher take-home pay than a permanent employee, in part because of demand and in part because he shares in the savings in fringe benefit costs. A series of temporary jobs may also provide a means of finding agreeable permanent employment.
Temporary employment would become even more attractive to employees if, as petitioner requests, we were to allow him to deduct the cost of his daily travel from home to work and return.
Petitioner's primary argument is that during 1966 he was employed by the two job shops, which were located in New York City. He contends that since he was assigned temporarily to client companies outside the New York City area, his costs of getting to work and back home should be deductible. He relies on Rev. Rul. 60-147, 1960-1 C.B. 682; I.R.C. Pub. No. 463, Travel, Entertainment and Gift Expenses, p. 8 (October 1970). His alternative argument is that since he was a temporary employee, his residence in Brooklyn was his ‘tax home,‘ and that the 72-mile round trip to Syosset and the 120-mile round trip to Norwalk were trips away from home. See Hollie T, Dean, 54 T.C. 663, 667 (1970).
Until the decision of the U.S. Supreme Court in United States v. Correll, 389 U.S. 299 (1967), courts generally had paid scant attention to the distinction between travel expenses deductible under section 162(a)(2) and transportation expenses deductible under the general provisions of section 162(a). Compare Joseph M. Winn, 32 T.C. 220 (1959), which discusses ‘away from home’ under section 162(a)(2), with William L. Heuer, 32 T.C. 947 (1959), which appears to allow a deduction under section 162(a), but which is often cited in cases considering section 162(a)(2).
With our decision in Joseph M. Winn, supra, respondent had ceased litigating the overnight rule with respect to transportation expenses under section 162(a) (2). See Rev. Rul. 60-147, 1960-1 C.B. 682. The ruling states that it ‘considers the decision erroneous to the extent that it allows an employee to deduct transportation expenses on one-day round trips as expenses of travel ‘while away from home.“ It added, however, that ‘The same problem does not arise under present law because section 62(C) * * * now allows an employee to deduct business transportation expenses in computing adjusted gross income.’ The Internal Revenue Service ruled that the expenses of 1-day trips, if deductible, were deductible under section 162(a) rather than under section 162(a)(2).
In enacting sections 62(2)(C) and (D), Congress distinguished between expenses of ‘travel away from home’ and ‘transportation expenses.’ Sec. 62(2)(B) and (C). It extended to employees the privilege of deducting transportation expenses, not involving overnight trips, in computing adjusted gross income. (Prior law had required that these be treated as below-the-line deductions.) S. Rept. No. 1622, to accompany H.R....
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