Wills v. CIR

• Decision Date: 14 May 1969
• Docket Number: No. 22427.,22427.
• Citation: 411 F.2d 537
• Parties: Maurice M. WILLS and Gertrude E. Wills, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

411 F.2d 537 (1969)

Maurice M. WILLS and Gertrude E. Wills, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 22427.

United States Court of Appeals Ninth Circuit.

May 14, 1969.

Francis J. Butler (argued), of Butler & Lukins, Spokane, Wash., for appellants.

Edward L. Rogers, Washington, D. C. (argued), Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Crombie J. D. Garrett, Attys., Dept. of Justice, Lester R. Uretz, Chief Counsel, IRS, Washington, D. C., for appellee.

Before BARNES, DUNIWAY and CARTER, Circuit Judges.

BARNES, Circuit Judge:

This case arises upon a petition to review a decision of the Tax Court sustaining the Commissioner's determination of deficiencies in the taxpayers' income taxes paid for the years 1962 and 1963. The opinion of the court below is reported at 48 T.C. 308 (1967). Jurisdiction is conferred on this court by 26 U.S.C. § 7482.

Taxpayers Maurice M. Wills and Gertrude E. Wills are husband and wife. They filed joint income tax returns on a cash basis for the calendar years 1962 and 1963. Taxpayer Maurice M. Wills has been a professional baseball player since 1951. From June 1959 through November 1966, he played baseball for the Los Angeles Dodgers, whose club home is Los Angeles, California.

The 1962 and 1963 contracts between Wills and the Dodgers provided that Wills was to be paid semimonthly at the Dodger headquarters in Los Angeles. About half the Dodgers' games were played each season in Los Angeles, and in 1962 and 1963 taxpayer spent at least 87 days in Los Angeles as a member of the Dodger baseball team. In 1963, he spent four additional days in this city in connection with the World Series, and additional time there (perhaps three weeks) preparing for a night club routine with five other members of the Dodger team. Taxpayer spent the remainder of the 1962 and 1963 baseball seasons at (or traveling to and from) the other cities where the Dodger games were played. He also spent five or six weeks each year in Florida for spring training, and about a week in 1962 and two weeks in 1963 in Las Vegas, Nevada, participating in a night club routine with other teammates.

In 1958, Wills bought a house in Spokane, Washington. He and his family used this house as a personal residence. In January 1962, he bought a second house in Veradale, Washington, on the outskirts of Spokane. Taxpayer and his family vacated the first house and moved into the second, where they lived during 1962 and 1963, the two years in question. The first house was retained and used as rental property until it was sold in 1965. Wills' wife and five children resided in Spokane during the period in issue, and when he was in Spokane, taxpayer stayed at the residence with his family. In 1962 and 1963, he spent 138 and 96 days there respectively.

During 1962 and 1963, taxpayer did public relations work for the Dodger minor league team, the Spokane Indians, in Spokane. He received $5,000 from the Dodgers each year for this work.

In Los Angeles, Wills lived with the pastor of the church he attended in Los Angeles, and paid rent for these accommodations.

In 1962, taxpayer broke the major league baseball record for the most stolen bases in one season. He played in the 1962 All Star game and was voted "player of the game." He was also voted "most valuable player" of the National League, and received awards from the Associated Press as "Athlete of the Year," the Sport Magazine as "Man of the Year," the Baseball Writers as "Athlete of the Year," and California as "Athlete of the Year."

Following the final Dodger game of the 1962 season, taxpayer was also awarded an MG automobile with a fair market value of $1,731. This award was made by an automobile agency in Los Angeles after Wills was elected "most popular Dodger" by the patrons of that last game.

In January 1963, taxpayer received the S. Rae Hickok belt, stipulated to have had a fair market value of $6,038.19 at the time of receipt. The belt is awarded annually to the outstanding professional athlete of the prior year, and the predominant criterion for selecting each recipient is excellence in athletics. Ballots for electing the winner of the belt were sent to over 250 sports-writers and sportscasters throughout the United States, and the outcome of that vote determined who received the award. The belt was presented to Wills without any restrictions upon its disposition.

In his notice of deficiency, the Commissioner asserted that (1) the deductions claimed by taxpayer for travel, meals and lodging expenses incurred in the vicinity of Los Angeles were not allowable, for the reason that taxpayer had not established that these expenses were incurred "while away from home," as required by 26 U.S.C. § 62; (2) the fair market value of the MG automobile received by taxpayer as a prize or award was taxable as ordinary income under 26 U.S.C. § 74(a); and (3) the fair market value of the Hickok belt received by taxpayer as a prize or award was taxable as ordinary income under 26 U.S.C. § 74(a). The Tax Court upheld the Commissioner's determination with regard to each of these three items, and the correctness of that decision is now before us.

The Internal Revenue Code, 26 U.S.C. § 62(2) (B), provides that a taxpayer may deduct from his gross income "expenses of travel, meals, lodging while away from home, paid or incurred by the taxpayer in connection with the performance by him of services as an employee."

In the case of the present taxpayer, the Tax Court found that Los Angeles was his principal post of business and "home" for purposes of the Internal Revenue Code. The court also found that the taxpayer's motives for maintaining a residence in Spokane were personal rather than business oriented, and noted that employment by the Dodgers similar to that which Wills had in Spokane would have been available to him in Los Angeles.

Much litigation has centered about the location of an employee's tax home. In Commissioner of Internal Revenue v. Flowers, 326 U.S. 465, 66 S.Ct. 250, 90 L.Ed. 203 (1946), the Supreme Court considered this question and held that before a traveling expense deduction may be made the expense must be reasonable and necessary, it must be incurred while "away from home," and must be incurred in pursuit of business. The Court then held that where the taxpayer resided in one city and had his principal post of business in another, his expenses of commuting between residence and work were personal, and not deductible as business expenses. The Court concluded by stating that travel expenses in pursuit of business can arise only when the employer's business forces the taxpayer to travel and live temporarily in some place other than the principal place of business, thereby advancing the interests of the employer. And finally, Flowers also stated that business trips are to be identified in relation to business demands and the traveler's business headquarters, and that the exigencies of business rather than the personal conveniences of the traveler must be the motivating factors.

The principles articulated in Flowers, supra, have subsequently been applied in other situations. Thus, the Supreme Court held in Commissioner of Internal Revenue v. Stidger, 386 U.S. 287, 87 S.Ct. 1065, 18 L.Ed.2d 53 (1967), that the taxpayer's permanent post of duty was his home for tax purposes, even though the taxpayer's family could not live there. Other cases holding that the taxpayer's principal place of business is his tax home include Smith v. Warren, 388 F.2d 671 (9th Cir. 1968) and Steinhort v. Commissioner of Internal Revenue, 335 F.2d 496, 502-503 (5th Cir. 1964). See also Wright v. Hartsell, 305 F.2d 221, 223-224 (9th Cir. 1962).

No reported cases have determined the tax home of a professional baseball player. However, Revenue Ruling 54-147, 1954-1 Cum. Bull. 51, deals with this specific question and relying principally upon Commissioner of Internal Revenue v. Flowers, supra, provides that such taxpayers may deduct their traveling expenses when away from the "club town" in pursuit of business or employment.

In light of the above authorities, we hold that the Tax Court correctly determined that Wills' tax home was Los Angeles during the years in question, and that his expenses incurred for travel, meals and lodging in this area are not deductible as business expenses.

We are further impelled toward this conclusion by the fact that the determination of one's tax home essentially involves the resolution of a question of fact, so that the inferences and conclusions of the Tax Court must be given great weight by an appellate court. Commissioner of Internal Revenue v. Flowers, supra, 326 U.S. at 470, 66 S.Ct. 250; Peurifoy v. Commissioner of Internal Revenue, 358 U.S. 59, 79 S.Ct. 104, 3 L.Ed.2d 30 (1958); Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 289, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960).

Further, we agree with the Tax Court that the decisions in Patricia A. Ruby Hall, T.C.Memo. 1964-157, and Judy L. Gooderham, T.C.Memo. 1964-158, do not compel the conclusion that Wills' tax home was Spokane. As noted by the Tax Court, taxpayers Hall and Gooderham were employed by the Ice Follies and traveled on tour from city to city. They were never employed a substantial period of time in one city, as taxpayer Wills was, in the present case, in his "club town."

Nor are the decisions in cases such as Harvey v. Commissioner of Internal Revenue, 283 F.2d 491 (9th Cir. 1960) and Wright v. Hartsell, supra at 224, here controlling. In Harvey, we stated that an employee might be said to change his tax home if there is a reasonable probability known to him that he may be employed for a long period of time at his new station, and held that the particular taxpayer had not changed his tax home where employment at the new station normally lasted only a few months. In Wright v. Hartsell, we stated that where it appears probable that a taxpayer's...