T .C. Su m m ary Op i n io n 2 01 7 -1 7

UNITED STATES TAX COURT
CHRISTOPHER B. ANDERSON AND SANDRA R. ANDERSON, Pet i t i o n ers v .

COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 3 1 5 83 -1 5 S. Fi l edM arch 1 6 , 2 01 7
.
Ch ri st o p h er B. An d ers o n an d San dra R. An d ers o n , p ro s es e. Nat h an C. J o h n st o n an dLi n et t e B. An g el as tro , fo r res p o n d en t .

SUM M ARY OPINION GUY, Sp eci al Tri al J u d g e: Th i s cas e was h eardp u rs uan tt o th e p ro v i s i o n s o f s ect i o n 7 4 63 i n effect wh en th e p et i ti o n was fi l ed
. 1 Pu rs u an tt o s ect i o n 7 4 6 3 (b ),

1 Un l es s o th erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de, as am en d edan di n effect fo r t he t ax ab l e y ear 2 0 1 2 , an dal l Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedu re.-2
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th e d eci s i o n t o b e en t eredi s n o trev i ewab l e b y an y o th er co u rt , an dth i s o p in i o n s h al l n o tb e t reat edas p reced en tfo r an y o th er cas e. Res p o n d en ti s su eda n o t i ce o f d efi ci en cy t o p et i t i o n ers d et erm i n i n g a Fed eral i nco m e t ax d efi ci en cy o f $ 6 ,0 9 5 fo r t h e t ax ab le y ear 2 0 1 2 (y ear i n i s s u e). Pet i t io n ers , h u s b an d an dwi fe, fi l eda t i m el y p et i t i o n fo r red et erm i nat i o n wi th th e Co u rt . Atth e t i m e t h e p et i t i o n was fi led , p et it i o n ers res i dedi n Cal ifo rn ia. Th ere i s n o d i s p u t e t h atdu ri n g th e y ear i n i s s u e p et it i o n ers p ai d “ m ov i n g ex p en s es ” o f $ 1 7,4 1 5 as th att erm i s d efi n edi n s ect i o n 2 1 7 (b ). Th e p art i es al s o ag ree t h atM r. An ders o n ’ s n ew p ri n ci p al p l ace o f wo rki n Cal i fo rn i a was atl eas t 5 0 m i l es fart h er fro m

h i s fo rm er res i d en ce i n Pen n sy l van i a t h anh i s fo rm er p ri n ci p al p l ace o f wo rki n Pen ns y l v an i a was fro m h i s fo rm er res i d en ce. See s ec. 2 1 7 (c)(1 )(A). Th e s o l e i s su e fo r d eci s i o n i s wh et h er M r. An d ers o n was a fu l l -t i m e em pl o y ee ath i s n ew p lace o f em p l o ym en tfo r atl eas t3 9 week s du ri n g th e o n ey ear p eri o db eg i n ni n g wi th h i s arri v al i n the g en eral l o cat i o n o f h i s n ew p ri n ci p al p l ace o f wo rk . See s ec. 2 1 7 (c)(2 )(A). Back gro u n d So m e o f t h e fact s h av e b een s ti p u lat ed an dare s o fo u n d. Th e s t ip u l at i o n o f fact s an dth e acco m

p an y i n g ex h i b i t s are i nco rp o rat ed h erei n b y th i s referen ce.-3
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M r. An d ers on earn eda b ach el o r’ s d eg ree fro m th e Un i v ers i ty o f So u th ern Cal i fo rn i a i n 1 9 7 9 , an d h e was cert i fi ed as a p ubl i c acco u n t an ti n 1 9 8 1
. In th e y ears b efo re 2 0 1 2 p et i t io n ers res i d edi n Pen n s y l v an i a. In Decem b er 2 0 1 1 M r. An d ers o n was l ai do ff b y h i s em p l o y er, an dp et it i o n ers qu ick l y d eci d ed t o m o v e t o Cal i fo rn i a wh ere M r. An d ers on h ada n et wo rko f p ro fes s i o n al co n t act s th ath e co u l d cal l up o n t o as s i s th i m i n h i s s earch fo r a n ew p o s i ti o n . Th e p art i es ag ree t h atM r. An ders o n arri vedi n th e g en eral l o cat i o n o f h i s n ew p ri n ci p al p l ace o f wo rk i n Cal i fo rn i a o n M arch 7 , 2 0 1 2
. OnJ u ne 7 , 2 0 12 , M r. An d ers o n s i g n edan em p l o ym en tag reem en twi th Dav idM
. Lewi s Co ., LLC (DLC). Parag rap h 1 o f t h e em p l o ym en tag reem en t
s t at es i n rel ev an t p art : “ Th i s Ag reem en ts h al l co m m en ce o n J u l y

1 6 , 2 0 12 , an d
s h al l co n t i n u e fo r o n e fu l l cal en d ar y ear. * * * Du ri n g the t erm o f th i s Ag reem en t, Em p l o y ee s h al l p ro v id e t h ei r fu l l t i m e s erv i ces t o Th e Co m p an y .” Parag rap h 6 o f th e em p lo ym en tag reem en t , a n o n s o l i ci tat i o n cl au s e, s t at es th at , du ri n g t h e t erm o f th e ag reem en tan dfo r o n e y ear aft er i t s t erm i n at i o n , ex p i rat i o n , o r can cel l at i o n , M r. An d ers o n wo u ldn o t p ro v i d e o r o ffer t o p ro v i d e s erv i ces t o DLC’ s cl i en t s (o th er t h an th ro ug h DLC) i f DLC h adas s i g n edo r i n tro du cedM r. An d ers o n t o that cl i en t wi th i n th e p reced in g 1 2 m o n th s . Parag rap h 1 0 o f t he em p l o ym en t ag reem en ts t at es i n rel ev an tp artth atth e ag reem en t“ co n t ai ns th e en t i re ag reem en t-4
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b et ween th e p art i es as t o i t s s ub jectm at t er an di t s up ers ed es al l p ri o r ag reem en t s ”
an d th atm o d i fi cat i o n s (o th er t h an m o d ifi cat i o ns t o em p l o y ee b en efi t s o r ch an g es req u i redb y

ap p l i cab l e l aws o r reg u l at i o n s) m u s tb e s etfo rt h i n a d o cu m en ts i g n ed b y th e p art i es . A few d ay s aft er M r. An d ers o n ex ecu t edth e em pl o ym en tag reem en t , DLC p ers o n n el co n tact edh i m

an dreq u es t edh i s as s is t an ce i n p rep ari n g m ark et i n g
m at eri al s fo r d is s em i n at io n t o t h e fi rm ’ s cl i en t s h i g h l i g h t i n g h i s b ack g ro u n dan d
ex p eri en ce. 2 M r. An d ers o n res p o n d ed t o th es e req u es t s o v er t h e n ex ts ev eral d ay s. He al s o p art i ci p at ed in em p lo ym en t -rel at ed trai n i n g p ro gram s. Becau s e M r. An d ers o n was n o tel i g i b l e fo r p ai d v acat i o n t i m e duri n g h i s fi rs ty ear o f em

p l o ym en twi th DLC, th e An ders o n s t oo k a 1 0 -d ay fam i l y v acat i o n i n J u n e 2 0 12
. M r. An d ers on b eg an p ro v i d i n g co n su l t i n g s erv i ces t o DLC’ s cl i en t s o n M o n day , J u l y

1 6 , 2 0 1 2 , an dh e recei v edh i s fi rs tp ay ch ecko n J u l y 2 7 , 2 0 1 2,

2 Res p o n d en tres erv edan o b ject i o n i n th e s t ip u l at i o n o f fact s t o th e ad m i s s i o n o f an ex h i b itwh i ch i n cl u des em ai l ex ch an g es b et w een DLC p ers o n n el an d M r. An d ers on fro m

J u n e 1 1 t o 2 2 , 2 0 1 2 . Rel y i ng o n th e p aro l ev id en ce ru l e, res p o n d en t as s ert s t h atthe b es tev i d en ce o f M r. An ders o n ’ s em p l o ym en t rel at i o n s h i p wi th DLC i s t h e em p l o ym en tag reem en th e ex ecu t edo n J u n e 7 , 2 0 1 2
. As d i scu s s edb el o w, we h av e co n s i d eredth e en t i re reco rd(i n cl ud i n g th e d i s p u t ed ex h ib i t ) an dco n cl u d e t h atM r. An d ers o n was n o ta fu l l -t i m e em p lo y ee fo r t h e req u i s i t e t i m e u n d er s ec. 2 1 7
. Un d er t h e ci rcu m s t an ces , th e ad m is s io n o f p aro l ev i d en ce i s o f n o co ns equ en ce, an dwe co n s id er res p o n d en t ’ s o b ject i on m oo t .-5
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co m p en s at i n g h i m

fo r 5 6 h o u rs o f wo rk p erfo rm edduri n g th e t wo -week p eri o d
en d in g J u l y

2 2 , 2 01 2 . Th e p art i es ag ree t h atM r. An d ers o n was n o ta fu l l -t i m e em pl o y ee i n th e g en eral l ocat i o n o f h i s n ew p ri n ci p al p l ace o f wo rki n Cal i fo rn i a fro m M arch 7 th ro u g h J u n e 6 , 2 0 1 2 , b u t th ath e was a fu l l -t i m e em pl o y ee i n th at g en eral l o cat i o n fro m

J u l y 1 6 , 2 0 1 2 , th ro u g h M arch 7 , 2 0 1 3
. Di s cu ss i o n As a g en eral ru l e, the Co m m i s s i on er’ s d et erm i nat i o n o f a t ax p ay er’ s l i ab i l i t y i n a n o ti ce o f d efi ci en cy

i s p res u m edco rrect , an dth e t ax pay er b ears th e b urd en o f p ro v in g th atth e d et erm i n at io n i s i n co rrect . Ru l e 1 4 2 (a); W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 1 5 (1 9 3 3 ). Tax d edu ct i o n s are a m at ter o f l eg i s l at i v e g race, an dth e t ax p ay er b ears th e b u rd en o f p ro v i n g en t it l em en t t o an y d edu ct i o n cl ai m ed . Ru l e 1 4 2 (a); INDOPCO, In c. v . Co m m i ss i o ner, 5 0 3 U.S. 7 9 , 8 4 (1 9 9 2 ); New Co l o n i al Ice Co . v . Hel v eri n g , 2 9 2 U.S. 4 3 5 , 4 4 0 (1 93 4 ). Un d er cert ai n ci rcu m s t an ces , th e b u rd en o f p ro o f wi th res p ectt o rel ev an t fact ual i s s u es m ay

s h i ftt o th e Co m

m i ss i o ner u n d er s ect i o n 7 4 9 1(a). Al th o u g h p et i t i o n ers h av e n o t as s ert edth at s ect i o n 7 4 9 1 (a) ap p l i es , we fi n d th atth e fact s th atare rel ev an tt o t he d i s p o s i t i o n o f t h i s cas e are n o ti n d i s p ut e. Co n s equ en t l y , th e p l acem en to f t h e b u rd en o f p ro o f i s i m m at eri al
.-6
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Sect io n 2 1 7 (a) al l o ws as a d edu ct i o n “ m o v in g ex p en s es p ai d o r i ncu rred du ri n g th e t ax ab le y ear i n co n n ect i o n wi th th e co m m en cem en to f wo rkb y

th e t ax p ay er as an em

pl o y ee o r as a s el f-em

p l o y edi n d i v i du al ata n ew p ri n ci p al p l ace o f wo rk .” Sect i o n 2 1 7 (b ) g en eral l y d efi nes th e t erm

“ m o v i n g ex pen s es ” as th e reas on ab l e ex p en s es o f m o v i ng h o us eh o l dg o o ds an dp ers o n al effect s fro m th e fo rm er res i d en ce t o th e n ew res i d en ce an d rel at edtrav el
. Sect io n 2 1 7 (c) i m

po s es co n d i ti o n s t h at t ax p ay ers m u s ts at i s fy

t o b e el i g i b l e t o cl ai m a d edu ct i o n fo r m o v i ng ex p en s es . Th e co n di t io n ati s s u e i n thi s cas e req u i res th at , du ri ng th e 1 2 -m o n th p eri o d i m m ed i at el y fo l l owi n g a t ax p ay er’ s arri v al i n the g en eral l o cat i o n o f h i s n ew p ri n ci p al p lace o f wo rk , th e t ax p ay er b e em pl o y edfu l l t im e i n th atg en eral l o cat i o n fo r at l eas t3 9 week s . Sec. 2 1 7 (c)(2 )(A). 3 Gi v en th atM r. An d ers o n arri v edi n Cal i fo rn i a o n M arch 7 , 2 0 1 2 , h e h adt o h av e wo rk edas a fu l l -t i m e em pl o y ee atl eas t 3 9 week s o v er t h e 1 2 -m o n th p eri o d t h ati m

m ed i at el y fo ll o wed
. Pet i t i o ners m ai n t ai n t h atM r. An d ers o n s at i s fi edth e 3 9 -weekt es tb ecau s e h e b ecam e a fu l l -t i m e em

pl o y ee wh en h e s i g n edthe DLC em p l o ym en tco n tract o n

3 Sec. 2 1 7 (d ) p ro v id es fo r a wai ver o f t h e fu l l -t i m e em p l o y ee req ui rem en to f s ec. 2 1 7(c)(2 ) i f t h e t ax p ay er i s u n ab l e t o s at i s fy i t b ecau s e o f d eat h , d i s ab il i ty , o r i n v o l u n t ary

s ep arat i o n fro m

th e em p l o y er--ci rcu m st an ces th atare n o ti m p l i cat edi n th i s cas e.-7
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J u n e 7 , 2 0 1 2 , an d th at h e rem ai n edi n th ats t atu s th ro ug h M arch 7 , 2 0 1 3
. 4 In
s up p orto f t h i s p ro p o s i t i o n, p et i t i o n ers as s ertthataft er J u n e 7 , 2 0 1 2 , M r. An d ers o n was n o l o n ger ab l e t o s eekal t ern at i v e em p l oym en to p p o rtu n i t i es , an dDLC p ers o n n el treat ed h i m

as a fu l l -t i m e em

p l o y ee wh en they

req ues t edth ath e as s i s t i n th e p rep arat i o n o f DLC m ark et i n g m at eri al s an den g ag e i n trai n i n g act i v i t i es . Res p o n d en tco n t en d s th atM r. An d ers o n d i dn o tm eetth e 3 9 -week t es t b ecau s e h e d i dn o tb eco m e a DLC em p l o y ee (fu ll t i m e o r o therwi s e) u n t i l J u l y 1 6 , 2 0 1 2 --t h e em

p l o ym en tco m

m en cem en t d at e s p eci fi ed i n h i s em p l o ym en t ag reem en t . W e ag ree wi th res p o n d en t . M r. An d ers on ’ s em

p lo ym en tag reem en twi th DLC s t at es i n p ert i n en tp art :

“ Th i s Ag reem en t s hal l co m m en ce o n J u l y

1 6 , 2 0 1 2 , an ds h al l co n t i n u e fo r o n e fu ll cal en d ar y ear”, an di t “ co n t ai n s t h e en t i re ag reem en tb et ween th e p art i es as t o i t s s ub jectm at t er”. M r. An d ers on ackn o wl ed g es thath e fi rs tp ro vi d edco ns u l t i n g s erv i ces t o DLC’ s cl i en t s o n J u l y 1 6 , 2 0 12 , an dth at h e was fi rs tad d edt o DLC’ s p ayro l l an db ecam e el i g i b l e fo r em p l o y ee b en efi t s o n th at d at e. In th e l i gh to f t h e em pl o y m en tag reem en t an dM r. An d ers o n ’ s p ayro l l reco rd s , we co ncl u d e t h ath e fi rs tb ecam e a fu l l -t i m e em p l o y ee o f DLC o n J u l y

1 6 , 2 0 1 2
.

4 Th e p eri o dJ u n e 7 , 2 0 1 2 , th ro u g h M arch 7 , 2 01 3 , co m p ri ses 3 9 week s .-8
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Th ere i s n o s up p o rti n th e reco rdfo r p et i t i o ners ’ as sert i o n t h atM r. An d ers on s h o u l db e co n si d ereda fu l l -t i m e em p l o y ee o f DLC as o f J u n e 7 , 2 0 1 2 , o n th e g ro u n dth ath e was b arred fro m s eek i n g em

pl o y m en twi th an o th er em

p l o y er aft er t h atd at e. Th e em

p l oym en tag reem en tco n t ai n s n o p ro v is i on b arri n g M r. An d ers on fro m

s eek i ng o th er em

p l o y m en to p po rtu n i t ies b efo re J ul y 1 6 , 2 01 2 . In th i s reg ard , th e n on so l ici t at i on cl au s e i n th e em p lo ym en tag reem en t , wh i ch b arred M r. An d ers o n fro m

at tem pt i n g t o p erfo rm

s erv i ces fo r DLC’ s cl i en t s (o th er t h an th ro u g h DLC), was n o teffect i v e u n t i l J u l y 1 6 , 2 0 1 2
. W e l i k ewi s e are n o t p ers u ad edb y p et i t i o n ers ’ arg u m en tth atM r. An d ers o n s h o u ldb e co n s i d ereda fu l l -t i m e em p l o y ee b ecau s e DLC p ers o n nel req u es t edh i s as s i s tan ce i n p rep ari n g m ark et i n g m at eri al s an dh e en g ag edi n t rai n i ng act i v i t i es . Em p l o ym en t g en eral ly

i s co n s id eredt o co m

m en ce wh en th e em

p l o y er i s u n d er an o b l i g at i o n t o p ay

th e em pl o y ee. See, e.g ., W al l i n g v . J ack s o n v i l l e Term in al Co ., 1 4 8 F.2 d7 6 8, 7 6 9 (5 th Ci r. 1 9 45 ). 5 Pet i t io n ers h av e n ots u gg es t ed(an dth e em ai l s th atM r. An d ers on ex ch an g edwi th DLC p ers o nn el d o n o ts h o w ) t h atDLC was
o b l i g edt o p ay

h i m fo r as s i s t i n g i n the p rep arat i o n o f t h e m ark et i ng m at eri al s o r th ath e ex p ect edt o b e p ai d fo r t h o s e s erv i ces o r fo r en gag i n g i n trai n i n g act i v i t i es .

5 Bl ack ’ s Law Di ct i o naryd efi n es th e t erm “ em pl oym en t ” as “ [w] o rk fo r wh i ch o n e h as b een h i red an d i s b ei n g p ai db y an em p lo y er.” Bl ack ’ s Law Di ct i o n ary

6 4 1 (1 0 th ed . 2 0 1 4 ).-9
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As we s ee i t , th e DLC-rel at edact i v i t i es th atM r. An d ers o n en gag edi n b efo re J ul y 1 6 , 2 0 1 2 , am o u n t edt o ro u t i n e p rel i m i n ary ad m i ni s trat i ve t as k s th atare req u i red b efo re o n e en t ers i n t o s erv i ce ata n ew p lace o f em p l o y m en t . Co n si d eri ng al l th e fact s an dci rcu m s t an ces , we co n cl u d e t h at M r. An d ers o n b eg anfu l l -t i m e em

p l o ym en twi th DLC o n J u l y 1 6 , 2 0 1 2 . W e t h erefo re s u s t ai n res p o n d en t’ s d et erm i n at i o n d i s al l o wi n g t h e d edu ct i o n i n d i s p u t e. To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t ered fo r res p o n den t .