TAX COURT OPINION

Case: Robert J. Wheeler & Marlene Colerico
Docket Number: 6104-17S
Judge: Gustafson
Opinion Type: bench
Filed: 03/29/2019
Pages: 14

UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBERT J. WHEELER & MARLENE COLERICO, Petitioners, v. ) ) ) ALS ) Docket No. 6104-17S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before the undersigned judge at Boston, Massachusetts, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for the Commissioner. (Signed) David Gustafson Judge Dated: Washington, D.C. March 29, 2019 SERVED Mar 29 2019 Bench Opinion by Judge David Gustafson March 12, 2019 Robert J. Wheeler & Marlene Colerico v. Commissioner of 3 Internal Revenue Docket No. 6104-17S THE COURT: The Court has decided to render the following as its oral Findings of Fact and Opinion in this case. This Bench Opinion is made pursuant to the authoritu avantpd hv spnrion 7459(h) of the Tntornal 1 2 3 4 5 6 7 8 o 10 Revenue Code (26 U.S.C.), and Rule 152 of the Tax Court 11 Kules or eractice ano eroceaure; ana it sna11 not ce 12 13 14 relied on as precedent in any other case. By notice of deficiency dated December 21, 2016 (Ex. 3-J), the Internal Revenue Service ("IRS") determined 15 deficiencies in the Federal income tax of petitioners 16 Robert J. Wheeler and Marlene Colerico for the years 2012 17 and 2013. The sole issue for decision is whether Mr. 1R Wheeler substantiated his entitlement to deductions for 19 moving expenses, which the IRS disallowed, for two alleged 21 from Virginia to Florida) and one move in 2013 (from 22 Florida back to Massachusetts). We uphold the IRS's 23 disallowances. 24 This case was tried in Boston, Massachusetts, on 25 March 11, 2019. Patricia L. Gentile represented . crioers 73)406-2250 { operations@escribetsmet i www.escribersaet Petitioners, and arian Howell represented the Commissioner. On the evidence before us, we find the 4 following facts: Pre-suit-year facts FINDINGS OF FACT Since long before the years in issue, Mr. 1 2 3 4 5 6 7 Wheeler and his wife Ms. Colerico resided in 8 Massachusetts. They owned and still own a house there. o Rinns abont 2002 Mr. Whpolpr was omnloved hv Ravthonn 10 Corporation, and for most or all of that time he was 11 assignea to Maytneon's "Uoora duay Keplacement t"Uux"j 12 Program". His work on that program evidently did not 13 require that he reside near the ship to which it 14 Pertained. 15 16 2012 transfers to Virginia and Florida In February 2012 Raytheon announced that the CJR 17 Program "has reached the program phase when the ship 1R transits from Corpus Christi, TX to Norfolk, VA." (Ex. 4, 19 P. 92.) Mr. Wheeler was assigned to be on board the ship ZU 101 Ludt tidus1L. as Lue sulp dppiuduneu 1Nu11uis . 21 Wheeler was offered a place on the "team" for the next 22 23 Phase of the CJR program. He decided to accept the offer. Raytheon prepared for Mr. Wheeler a "Memorandum 24 of Understanding" ("MOU"), subtitled "Temporary Domestic 25 Offsite Assignment Agreement", that set out proposed terms cnærs 1973)406-2250loperations@escribers.net!www.escribennet for his work. The MOU stated an "Initial Start Date" of 5 2/2b/2012 and an "Assignment End Date" of 2/23/2013 -- i.e., an ostensible term of less than a year's duration -- followed by a "NOTE" that read: "minimum of 90 days and not to exceed 365 days". The MOU stated that his "Assignment City, State" was to be "Norfolk, VA", and that his "Tax Home State" was "MA" (i.e., Massachusetts). The MOU provided that he would receive a "Per Diem" of "$89 Dailv" for lodaina and "$61 Dailv" for mpals and 1 2 3 4 5 6 7 8 o 10 incidental expenses, for a total of $150 per day (equal to 11 ©z,1uu ror eacn c1weex1y pay perloo, or nos,cuu per year). 12 Above the space for Mr. Wheeler's signature, the MOU 13 14 stated: "I understand that I will pay taxes on employer-provided travel and living expenses in connection 15 with my temporary assignment, unless I maintain a 'tax 16 17 1R home' other than in the area of my temporary assignment. * * * [W]hile I am on temporary assignment, I must use the 'tax home' residence for lodoina, my spouse or children 19 must reside at the residence, or I must periodically 21 22 home' residence." Underneath the signature block was the statement: "This agreement does not constitute a guarantee 23 of employment." Mr. Wheeler signed the MOU on March 9, 24 2012, and around that time, he moved various personal 25 effects to Norfolk. (973)406-2 250| operations@esaibers.net I www.esaibersteet 6 Several months later when he was again on board the ship, Mr. Wheeler was informed that the ship was to be moved to Port Canaveral, Florida, and he was offered a place on the "team" in Florida. Again he decided to accept the offer, and in July 2012 an MOU was again Prepared (with the same "Temporary" subtitle) that was similar or identical in all material respects to the March 2012 MOU -- except that his "Assignment City, State" was to hp "Port Canavpral _ FT,". and that his "Tax Hnmp Starp" typed onto the July 2012 MOU was "FL" (for Florida). nowever, Mr. wneeler strucK out tne "rL", nana-wrote "MA" (for Massachusetts), and put his initials by the correction. Mr. Wheeler signed the MOU on July 24, 2012, and moved various of his personal effects to Port 1 2 3 4 5 6 7 8 o 10 11 12 13 14 15 Canaveral around that time. 16 17 1R 19 Mr. Wheeler's wife did not ever move to Virginia or to Florida but stayed at their home in Massachusetts. He made five or six trips back to Massachusetts for visits in 2012, 21 travel and move household goods and personal effects from 22 Massachusetts to Virginia and from Virginia to Florida. 23 24 2013 transfer to Massachusetts several months into 2013, Raytheon announced 25 that the ship would make another move -- this time to San criners 1973) 406-2 250| operationsøescribers.net j wwwescribeanet Diego, California. Mr. Wheeler decided that he did not 7 want to transfer to California. Instead, he found another job at Raytheon back in Massachusetts. In about July 2013 he moved various personal effects from Florida to 1 2 3 4 5 Massachusetts, and he incurred at least $13,440 to make 6 7 8 o 10 11 12 that move. Per diem payments pursuant to the MOU Consistent with the identical terms of the two MOTTs. Ravthpon roanlarlv naid Mr. Whoplpr rho $150 nor diem (usually in $2,100 bi-weekly installments) beginning in Apr11 ZU12 anQ enQlng ln July ZUld anQ Cnaracter1zeQ the amounts on its payroll records as "Per Diem 13 Non-Taxable". (See Ex. 4-J, pp. 86-91.) Raytheon did not 14 15 16 17 la 19 include the per diem amounts in Mr. Wheeler's gross pay that it reported on Form W-2. Tax returns, audit, and petition On line 26 of their tax returns, petitioners claimed deductions for "Movino expenses" of $9,342 in 2012 and $13,440 in 2013. (Exs. 1-J, 2-J.) After examining ZU L11ose e u 11, 11e irm uiscilloweu 11e inuv1119 expelise 21 22 deductions and issued its notice of deficiency (Ex. 3-J) on December 21, 2016. Petitioners timely filed their 23 petition with this Court on March 13, 2017. At the time 24 they filed their petition, petitioners resided in 25 Massachusetts. (Stip. 1.) cnners 1973)406-2250joperations@escribetsnet|wwwesenbersnet 5 OPINION I· APPlicable legal principles A. Burden of proof 8 The IRS's determination is presumed correct, and taxpayers generally bear the burden to prove their entitlement to any deductions they claim. Rule 142(a). Taxpayers must satisfy the specific requirements for any dpdurrinn claimod. App TNDOPPO. Tnn. v. Commissinnpr. 507 1 2 3 4 5 6 7 8 o 10 U.S. 79, 84 (1992). The Commissioner does not dispute 11 12 13 tnat Mr. wneeler incurrea tne expenses tnat ne alleges; rather, the Commissioner contends that they did not constitute deductible moving expenses because they did not 14 qualify under section 217. 15 16 17 1R 19 B. Moving expenses section 217(a) provides: "There shall be allowed as a deduction moving expenses paid or incurred during the taxable year in connection with the commencement of work by the taxpayer as an employee * * * at a new principal . _ .c _ _ _ _ 1 _ f f n _ _. L A 1 7 / 1 / 1 Ty L 1 21 'moving expenses' means only the reasonable expenses (A) 22 of moving household goods and personal effects from the 23 24 former residence to the new residence, and (B) of traveling (including lodging) from the former residence to 25 the new place of residence." The Commissioner does not . (cid:0)522[lers 73)406-2250|operationseeraïbersnet|www.esaibers.net diSPute that Mr. Wheeler incurred reasonable expenses in the claimed amounts for his moves to Virginia and Florida and back to Massachusetts, and the Commissioner does not dispute that Virginia and Florida constituted new places 9 of work for Mr. Wheeler in 2012. However, the parties both state, in identical words (see respondent's pretrial memorandum ("PTM") at 5, and petitioners' PTM at 5), that a "new principal place of work undpr sperion 217 is definpd as 'a now nlane wherp 1 2 3 4 5 6 7 8 a 10 the taxpayer will be employed on a permanent or indefinite 11 cas1s as alstingulsnea rrom a temporary cas1s. 12 Schweighardt v. Commissioner, 54 T.C. 1273[, 1277] 13 (1970)." The Commissioner contends that Virginia and 14 Florida were not "new principal place[s] of work" for Mr. 15 Wheeler, because they were temporary, rather than 16 Permanent or indefinite. Petitioners agree that this is 17 the critical issue but assert that Virginia and Florida 1R were permanent or indefinite places of work for Mr. 19 Wheeler. 21 The Commissioner advances three reasons that Mr. 22 Wheeler's employment in Virginia and Florida should be 23 24 25 characterized as temporary, and we agree with all three. A. Petitioners' family situation Mr. Wheeler's wife stayed in their home in Massachusetts. He testified, without any corroboration 10 and with little detail, that his wife looked for jobs in his new locations, but we are not persuaded that she ever intended to leave Massachusetts. She did not move with him to his Virginia and Florida locations, and there is no evidence that she ever even visited him there. Rather, their visits took place when he returned to their Massachusetts home. They did not sell the Massachusetts homp nor rpnr it ont: it rpmainpd thpir homp. B. The terms of the MOUs Born Muus are exp11cit ano empnatic aoout tne temporary character of his employment in those locations. The subtitle of the MOU calls the assignment "Temporary". The stated terms consisted of dates less than a full year 1 2 3 4 5 6 7 8 o 10 11 12 13 14 15 apart, and noted that the term was "not to exceed 365 16 days". In the block of text above Mr. Wheeler's signature 17 1R 19 by which he acknowledged that "I understand" the arrancement, his assianment is three times referred to as a "temporary assignment". 21 and that they do not reflect the character of Mr. 22 Wheeler's actual subjective understanding and intention. 23 He claims that, while the MOU stated a limited defined 24 term, his job did not have a limited term, since the 25 Project on which he was employed was expected to take e Crgners (973)406-2250f operations@escribers.net!www.escribersmet 11 1 2 3 4 5 years to complete and since both he and his employer expected that nis employment would continue indefinitely (perhaps with a series of new MOUs as appropriate). In fact, however, the MOU was a feature of the Virginia and Florida assignments but not of his prior and subsequent 6 Massachusetts assignments. The MOUs were needed in those 7 8 o 10 11 12 13 locations (and were of limited terms) only because they provided limited-term "incentives" (including in narrinnlar thp nor dipms disonssed holow). Tn panh Mæl. it was Mr. Wheeler's "assignment" that was identified as "temporary". C. The non-taxable per diems The objective fact that we think most at odds 14 with petitioner's position is the non-taxable treatment 15 16 17 1R that Raytheon and Mr. Wheeler agreed, in the MOU, to accord to the $150 per diem payments -- payments that, by the terms of the agreements, must have totaled more than $70,000 durina his time in Viroinia and Florida. Raytheon 19 did not include these amounts on Mr. Wheeler's Forms W-2, Z U dilu Ild U_LU 11U L 1UpUL L LIldllt Ull PU L_L L_LUllöi b LdX 16 LL11Ilö . 21 22 The only justification of which we can conceive for this treatment -- and it is the justification implicit in the 23 MOU language about "tax home" -- is the notion that Mr. 24 Wheeler's travel expenses would have been deductible by 25 him if he had paid them himself, so Raytheon's payment of (~[inf"S 73) 406.2250 j operations@escribetsmet l www.escribersmet those expenses in the first instance should not be 12 includible by him in his income. Assuming that this treatment is otherwise logical, it would be appropriate only as to travel expenses that were in fact deductible, 1.e., "traveling expenses * * * while away from home in the pursuit of a trade or business". Sec. 162(a)(2). If Mr. Wheeler's move to Norfolk, Virginia, in 2012 was permanent or indefinite (as he contends in this case), then Norfolk must have become his new home. In that case, food and lodging expenses in Norfolk would not have been incurred "away from home", payment of such expenses by Mr. 1 2 3 4 5 6 7 8 9 10 11 12 Wheeler would not have been deductible under section 13 162(a)(2), and Raytheon's per diems paid for those 14 15 16 17 expenses should not have been characterized as non-taxable payments to him -- neither under the Internal Revenue Code nor under the MOU. In the MOUs, Mr. Wheeler had agreements with 18 Raytheon, pursuant to which (a) Mr. Wheeler would maintain 19 his tax home in Massachusetts and (b) his per diems would 20 not be reported by Raytheon on Forms W-2 nor by Mr. 21 Wheeler on his income tax returns. Having claimed a tax 22 benefit (avoidance of income tax on some $70,000) by 23 Professing a Massachusetts tax home, Mr. Wheeler should 24 25 not now be permitted to disclaim his Massachusetts tax home and claim a contrary benefit (moving expense 13 deductions that depend on Massachusetts not remaining his home). The tax law abhors such asymmetry or "whipsaw" and consequently puts a heavy evidentiary burden on a party to a contract who seeks a tax treatment at odds with the terms of the contract. Cf. Muskat v. United States, 554 F.3d 183, 188-189 (1st Cir. 2009) (to alter an allocation in a written agreement for tax purposes, "the proponent must adduce 'strong proof' that, at the time of execution of the insernment. the contractina narrios actuallv 1 2 3 4 5 6 7 8 a 10 intended the payments to compensate for something 11 altrerent"); Harvey Maalo Lacoratories, Inc. v. 12 Commissioner, 470 F.2d 118, 119-120 (1st Cir. 1972) ("rule 13 of intention"). It is this whipsaw that informed the Tax 14 Court's construction in Schweighardt of the term "new 15 Principal place of work" in section 217(a): "[A] place of 16 work is not to be considered a taxpayer's principal place 17 of work under section 217 if a deduction is allowable for 1R 19 travelino expenses fincurred at that placel while away from home under section 162." 54 T.C. at 1277. 21 disallowance of the moving expense deduction, decision 22 will be entered for the Commissioner. This concludes the Court's oral Findings of Fact and Opinion in this case. 23 24 25 1 2 3 4 5 6 7 8 O 10 11 12 13 14 15 16 17 1R 19 ZU 21 22 23 24 25 (Whereupon, at 10:45 a.m., the above-entitled 14 matter was concluded.) e crners 973)406-2250|operations@escribersnetiwwwescribersnet CERTIFICATE OF TRANSCRIBER AND PROOFREADER 15 CASE NAME: Robert J. Wheeler & Marlene Colerico v. Commissioner DOCKET NO.: 6104-17S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 15 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Elaine T,aRnspp on March 12. 2019 hoforp the ITnirod Ararps Tax 1 2 3 4 5 6 7 8 o 10 Court at its session in Boston, MA, in accordance with the 11 appilcaole provlslons or tne current vercatim reporting 12 13 14 15 16 17 1 R 19 21 23 24 25 contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. Carrie Clouse, CDLT-143 3/18/19 Stacey Post Proofreader 3/18/19 Date c r(c)prs (973)406-2250|operations@escritersmet|www.escribersnet