Document: 370 U.S. 269 82 S.Ct. 1277 8 L.Ed.2d 484 C.J.D. RUDOLPH et al., Petitioners,v.UNITED STATES. No. 396. Argued April 3, 1962. Decided June 18, Richard A. Freling, Dallas, Tex., for petitioners. John B. Jones, Jr., Washington, D.C., respondent. PER CURIAM. 1 The petition certiorari in this case was granted because it thought to present important questions involving the definition of 'income' and 'ordinary necessary' business expenses under Internal Revenue Code. 368 913, 195, 7 130. An insurance company provided a trip from its home office Texas, New York City group agents their wives. Rudolph his wife were among beneficiaries trip, Commissioner assessed value them as taxable income.* It appears be agreed between parties that tax consequences turn upon Rudolphs' 'dominant motive purpose' taking company's offering it. In regard District Court, on suit refund, found by 'the primary purpose affording pleasure * nature bonus, reward, compensation job well done' point view Rudolphs 'was primarily vacation *.' 189 F.Supp. 2, 4—5. Court Appeals approved these findings. 5 Cir., 291 F.2d 841. Such ultimate facts are subject 'clearly erroneous' rule, cf. v. Duberstein, 363 278, 289—291, 80 1190, 1199, 4 1218 (1960), review would no importance save litigants themselves. appropriate disposition such situation is dismiss writ improvidently granted. See Rice Sioux Memorial Park Cemetery, 349 70, 78 n. 75 614, 618, 99 L.Ed. 897 (1955). 2 Writ dismissed. 3 Mr. Justice FRANKFURTER took part decision case. WHITE consideration or Separate opinion HARLAN. 6 Although reasons given dismissing should have been persuasive against granting certiorari, now here I think better decide it, two members having dissented merits. courts below concluded (1) 'all expense' company-sponsored convention constituted 'gross income' petitioners within meaning § 61 Code 1954, 26 U.S.C.A. (2) amount reflected not deductible an expense 162 Code, 162.1 Both conclusions are, my opinion, unassailable unless findings fact which they rested impeached us clearly erroneous. do can record, especially light 'seasoned wise rule Court' 'makes concurrent final absence very exceptional showing error.' Comstock Group Institutional Investors, 335 211, 214, 68 1454, 1456, 92 1911. basic facts, follows. Petitioners, husband wife, reside where husband's employer, Southland Life Insurance Company, located. By sold predetermined insurance, qualified attend 1956 and, line with policy, bring him. petitioners, together 150 other employees officers 141 wives, traveled special trains, housed single hotel during two-and-one-half-day visit. One morning devoted 'business meeting' luncheon, rest time 'travel, sight-seeing, entertainment, fellowship free time.' entire lasted one week. 9 paid all convention-trip amounted $80,000; petitioners' allocable share being $560. When did include latter joint income return, deficiency sustained also Appeals, judge dissenting, per curiam 841, citing recent Patterson Thomas, 289 108, same result had reached. held 'in done,' Rudolph, but 'primarily vacation,' costs personal nondeductible. I. 10 Under 1954 taxpayer-husband properly includible gross income? That section defines whatever source derived,' including, items, 'compensation services.' Certain sections enumerate particular receipts included concept income,'2 including prizes awards (with certain exceptions);3 while sections, §§ 101—121, specifically exclude income,' example, gifts inheritances4 (see 1218), meals lodgings furnished convenience employer.5 Treasury Regulations emphasize inclusiveness income.'6 11 sweeping scope taxing gains except those exempted,' Glenshaw Glass Co., 348 426, 430, 473, 476, 483; see Lo Bue, 351 243, 246, 76 800, 802, 100 1142; James United States, 366 213, 219, 81 1052, 1055, 'any economic financial benefit conferred employee compensation, form mode effected,' Smith, 324 177, 181, 65 591, 593, 89 830, seems clear Court's findings, if sustainable, reach statute. 12 Petitioners claim statutory exclusions notes 5, supra) taxpayer 111—112; rather characterize 'fringe benefit' excluded statute, yet intended encompassed reach. Conceding exhaustive, Government recognize so Glenshaw, necessary explore extent any nonstatutory exclusions.7 For surely Commissioner's competence consider 'reward, bonus excellence service,' employer's arranging trip. cannot say finding, confirmed has inadequately supported record.8 II. 13 There remains question whether, though income, outlay transportation, meals, lodging besiness 162.9 relevant factors branch Treas. Reg. 1.162—2.10 summary, regulation pertinent provides: 14 Traveling expenses, incidentals, reasonable conduct taxpayer's directly attributable deductible, 'undertaken than purposes' 'personal expenses' 'living expenses.' Treas.Reg. 1.162—2(a). 15 If who travels destination engages both activities,' traveling only 'related primarily' business; personal,' even some there; trade there travel fro not.11 Id., 1.162 2(b)(1). 16 Whether related 'depends circumstances each case.' 1.162—2(b) (2); too incurred attending convention. 1.162—2(d). 17 Finally, deductibility accompanies her depends, first, whether trip.' 1.162—2(c); so, must further shown wife's presence bona fide purpose. Ibid. 18 Where, here, may arguable reasons, crucial case, business' was, rather, nature.' trips conventions meetings taxpayers relevance here; doctors, lawyers, clergymen, others12 permitted similar deductions shows cases, business.' 19 places great emphasis he entrapped 'organization man,' required conventions, future promotions depend presence. Suffice find element compulsion; contrary, regarded vacation. Again, without adequate evidentiary support. Supra, U.S., pp. 273 274, S.Ct., p. 1280. 20 deductible. necessary, therefore, examine if, business. 21 resolved determinative factual issues taxpayers, according rules law set forth statute regulations, re-examine evidence, disturb erroneous.' here. 22 affirm. 23 DOUGLAS, whom BLACK joins, dissenting. 24 could not, think, seriously contended professional man, Senator Congressman, attends read paper seminar received Nor matter, assume, paid. Income connotation something mere payment expenses. U.S.C. 61, C.A. speaks terms gain, services, 'including fees, commissions, items.' services covers wide range. 1.61—1 provide: 25 'Gross includes realized form, money, property, services. realized, accommodations, stock, cash.' formula paid' might disguise whereby 'for services' Yet rare indeed conclude person gets attendance at sense. arrangement regular frequent earmarks sham device cloak remuneration, room fact-finders evasive. But isolated engagements kind rational connection rendered. 27 true petitioner employer. He selling met quota company. Other salesmen qualified, attending. They went City, stayed half days. day session luncheon; left social events. 28 On record finding 'expenses apparently proper deduction replete evidence management's good spend money leading agents—a kept transit well, giving ample discussions, exchanges experience, educational training. exigencies employment gave rise nothing dishonest, illegitimate, unethical about transaction. No attractive enjoys dislikes makes 'with more rendered does attitude toward job. 29 popular understanding award. laws filled exemptions 'awards' considered income. exemption example. Others proceeds life payable death, disability benefits, rental values parsonages, scholarship grants, allowances abroad, mustering-out payments Armed Forces, etc. Employees receive employers many fringe benefits 31.3401(a)—1(b)(10) 30 'Ordinarily, facilities privileges (such medical so-called 'courtesy' discounts purchases), offered employer generally, wages withholding relatively small merely means promoting health, will, contentment, efficiency employees.' 31 less obviously listed Regulations. constantly recurring—day after day, week Moreover, promotes 'efficiency' much enumerated 32 'income,' plainly Government, however, says our problem determine 'whether consistent ends equitable workable system' make such. designing 'equitable' system is, Congress, Court. 33 test applied carrying petitioner's Act explicit permitting (including expended lodging) away 'pursuit business,' 162(a)(2), 162(a) (2). 34 explicit. Section 1.162—2(b)(1) 35 'If activities, nature, activities destination.' (Italics added.) 36 Thus, combines deduct 'traveling expenses,' dominant. 37 1.162—2(b)(2) states: 38 'Whether depends period spent activity compared relating factor determining personal. If, spends subsequently additional five weeks will contrary.' least one-half mundane 'business' activities,1 nowhere near colorable transaction described 1.162—2(b)(2). 39 reason take out main stream precedents establish conventions. Judge Brown, dissenting how discriminatory is: 40 'Deductions allowed clergymen church convention; group; lawyer meeting American Bar Association; legal secretary national National physicians conventions; certified public accountants university teachers scientific meetings; cartoonists political persons Red Cross Convention; school summer school; attorneys institute Federal taxation; sent refresher courses become acquainted new processes industry; furniture store sending buyers annual mart; representatives associations; agent 844—845. 41 go back 1924 (Report 15, Sales Research Bureau, Nov. 1924) premised idea companies knowledge increase morale them.2 Why treated differently mystery. be, district argue, going matter law, 'pleasure we field judicial notice, weekend chore sacrificed valuable farm, woods, along seashore. 42 federal revenue incur. We advised 43 '* recently withdrawn objections Tax cases IRS Association Employees. 44 'No explanation publicly action Commissioner, generally presumed tests 1.162—2(d) sufficient relationship NAIRE. hailed actions setting precedent cited when NAIRE conventions.' CCH Standard Reports 23, 19, 1961, pt. 1, 2. 45 odd, indeed, need accounting movies saw nightclubs attended, order get deduction, must. III. 46 expenses3 state 1.162—2(c): 47 'Where him adequately performance incidental service cause qualify apply family accompany 48 civil philosophy, expressed community property concept, attributes earnings wife—an long last splitting law.4 contribution productivity known. specially recognized before issue arose tax.5 Business motivated inclusion wives executive testified trial: 49 'Q. hand you Plaintiff's Exhibit notice letter addressed 'John Doe'; bulletin entitled 'A Partner Has Been Formed.' 50 'Will tell what consists of? 51 'A. This agent, contract few days contract, enclosing booklet explaining she help 52 Please us, briefly detail, agency director attempt integrate wives' 53 functions mind addition communication, occasionally letters written concerning sales effort desired promoted. monthly publication mailed homes convenient opportunity magazine 54 'At most program(s), specific reference work, quite programs appear program. 55 Suppose didn't seek require convention, danger your degenerate into stag affairs, whole lost? 56 definitely tendency.' 57 reverse judgments leave category agents, men, accountants, nurses, others, until Congress decides otherwise. A return filed. As reporting procedure first place, 17(b), 'run through' offsetting amount. E.g., 71 (Alimony separate maintenance payments), 72 (Annuities; endowment contracts), 73 (Services child). 74: '(a) GENERAL RULE.—Except subsection (b) 117 (relating scholarships grants), amounts awards. '(b) EXCEPTION.—Gross made recognition religious, charitable, scientific, educational, artistic, literary, civic achievement, if— '(1) recipient selected enter contest proceeding; '(2) render substantial condition receiving prize award.' 102. 119. Some 101 (Certain death 103 (Interest governmental obligations), 104 (Compensation injuries sickness), 105 (Amounts accident health plans), 113 (Mustering-out Forces), (Scholarship grants). 1.61—1(a) derived, law. Gross 1.61—2(a) (1), (d) 1.74—1(a). rely 3401 3401, taxes, 31.3401(a)—1(b) (10) providing 'wages' withholding. admits benefits' taxed enough analogy perfect, laid-off company-financed supplemental unemployment plans 'taxable although Rev.Rul. 56—249, 1956—1 Cum.Bull. 488, amplified 60—330, 1960—2 46. said (189 F.Supp., 4—5): 'All considered, irrefutably leads conclusion: just doing gracious magnanimous thing awarding awarded automobile, clothes *. (W)e conclude, earned done.' note referred 271 1279 supra, years Canada, Mexico Havana, Colorado California, known appeal tourists, far removed Dallas. While alone nondeductible, I.R.S. News Rel. IR—394, August certainly circumstance consider. IN GENERAL.—There shall ordinary year business, including— pursuit raised $80,000 total corporation. lack symmetry 'deductibility' areas provide employees—such parking facilities, swimming pools, services—which employee, which, own funds, expense. practicalities demand hypothetical theoretical perfection, workaday problems concern Courts. Regulation promulgated 1958, applicable power prospective only, Int.Rev.Code 7805(b), exercised, beginning December 31, 1953. T.D. 6291, 1958—1 63. different prior comparable Regulation. 118, 39.23(a)—2(a). Compare 114 13. Deductions allowed: Coffey B.T.A. 1242 (doctor); Coughlin 203 307 (lawyer); Shutter (clergyman); Callinan T.C.M. 170 (legal secretary); 59—316, 1959—2 57; 60—16, 1960—1 58. Duncan T.C. 386 Ellis Burnet, 60 App.D.C. 193, 343 Reed 199 108 (insurance agent); Russell 334 (railroad fireman). group, arranged develop solidarity continuing seminar. 'One chief things accomplished secure unanimous principles underlying operations experience proved essential principles. organization anywhere complete grasp matters give men anything else. Home Offices necessity formulating rules, similarly constant disappointment understood. place above others accomplished. 'The Office arranges transportation largely city. centrally located lines approach, impracticable arrange meet way spot, considerable distance majority attending, then assembling nearer location proceeding destination. feasible, desirable several reasons. gives peculiar feeling satisfaction 'special' train cars, encourages friendlier arrive strangers, anxious down real work destination, all, decided contacts ever discussions.' Report 1924, 13, 17—18. germane tax, Superintendent ruled permissible. N.Y.Ins.Dept.Rulings (1953), Oct. 6, And Law, McKinney's Consol.Laws N.Y., c. 28, subdivisions 8, regulating agents' competitions. H.R.Rep. 1274, 80th Cong., 2d Sess., 47. 'Today increasing number interest husbands do, frequently them. fact, usually wholly lacking contact influence 'In negative positive, particularly careers involves evening appointments—a resented wife. Many thoroughly discouraged knew night failed 'write ten' dress. She bigger accomplishes part. desirability 'selling' spread rapidly years, today helped over rough spots career enthusiasm vision aroused increased convention'. supra 25—26.

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