Earl Warren: United States petitioner versus Homer O. Correll et al. Mr. Solicitor General.
Erwin N. Griswold: May it please the Court. This is a tax case involving a rather narrow question of statutory construction with respect to a matter as to which there is very little specific in the statute. And therefore, it seems to me that it is essentially a question of tax administration. The statutory provisions which are involved, there are two. They are set forth at the bottom of page 2 of the Government's main brief, Section 162 of the Internal Revenue Code allows the taxpayer to deduct the necessary expenses of carrying on a trade or business including, and these are the words; traveling expenses including the entire amount spent for meals and lodging while away from home in the pursuit of a trade or business. And if that statutory provision was the only one there was, I suppose this problem would not be here. There is however another section of the statute, a section which I may say was not mentioned in the opinion of the court below at Section 262 which provides except as otherwise expressly provided in this chapter. No deduction shall be allowed for a personal living or family expenses. The question arises on these facts. The taxpayer is a salesman whose home is in Fountain City, Tennessee, which I understand to be a suburb of Knoxville. He is one of some 16-group salesmen who works for a wholesale grocery company named Hale Brothers Incorporated which has its headquarters in Morristown, Tennessee, which is about 50 miles away from Fountain City. Each salesman has a territory. One or two have accounts only in their own hometowns. Some others have larger territories and make at least occasional overnight trips. But the taxpayer in this case left home each morning about 4:30 or 5:00 in the morning, made calls in several cities and towns and returned home between 4:30 and 5:00 in the afternoon. And the simple question in this case is whether this taxpayer is entitled to deduct in computing his taxable income, the cost of his two meals during that day, breakfast and lunch, which he usually had on the premises of his customers at places known to his employer so that his employer would be able to get in touch with him if there was any matter that he wanted to communicate to him. I think I should also mention that there is pending before the Court another case, the William A. Bagley against the United States, against the commissioner, Number 155, in which a petition for a writ of certiorari has been applied for which is essentially in conflict with the decision below. And the Court has not taken action on that petition.
Speaker: What circuit was that?
Erwin N. Griswold: That's from the First Circuit with if I may say so an excellent opinion by Judge Aldrich which is included in the petition in that case and that which seems to me they present a very fine analysis of the problem. The Bagley case is similar to this case. It's a little different in that it involves the free meals per day whereas the present case involves the two meals per day. In the Bagley case, the taxpayer was an engineer who had retired from a job at General Electric and did consulting work. He kept his office in his home. He was a widower, lived alone. The evidence was that he didn't like to cook or wash dishes. He left home in the morning at 6 o'clock. He often did not return until 9:00 or 10:00 at night. Sometimes traveled 100 miles during the day and took three meals; breakfast, lunch, and dinner. All of which he sought to deduct under Section 162 and the First Circuit held that none of them were deductible essentially under Section 262. The statutory provision in its present form goes back to 1921. The earlier statute had simply allowed the deduction of business expenses. And the Commissioner had first ruled that this allowed the deduction of travel expenses that is transportation expenses fares, but that it did not allowed the deduction of anything for meals and lodging, that that was barred by Section 262 since meals in particular were something which the taxpayer had to provide for himself anyway and it was a personal living or family expense. Later under that statute in 1920, the Commissioner put out a new regulation in which he said that the taxpayer could deduct the additional amount which he was required to expend on account of meals and lodging over and above what he would have had to expend if he had not been in a travel status. And the treasury of course immediately found that extremely difficult to administer because it was terribly hard to know what the additional amount was. Some people might live rather high at home and therefore couldn't deduct very much. And other people who are very frugal at home might be able to show a larger deduction. And it was in 1921 that Dr. T.S. Adams, the treasury's expert and adviser, appeared before Congress and recommended on behalf of the treasury, the statutory provision which is still in effect in essence allowing the deduction of the entire amount spent for meals and lodging while away from home in the pursuit of the trade or business. Curiously enough, the particular question was which we are concerned does not seem to have a reason for the next 20 years or more. I suppose that was because of high exemptions and relatively low rates which were involved at that time. However, it was very early established and there were decisions of the Tax Court in 1924. The first -- the very first volume of then it was the Board of Tax Appeals, and there had been administrative rulings as early as 1919 that the commuter could not deduct his meal expenses. And there where even some cases involving two-meal commuters, that is the businessman or the lawyer might come in and not only have lunch but he had to work in the evening. So he went out some place and had supper, and neither the lunch nor the supper was allowed as a deduction although I would point out that it could at least in some sense be regarded as coming within the literal language of the statute which allows the deduction of the entire amount expended for meals and lodging while away from home in the pursuit of a trade or business. Now, this meant that very early, it was recognized that away from home, was an illusive verbal construct and required some rather careful consideration. As early as 1940, the treasury ruled in effect that no deduction could be had unless the taxpayer was required to be a way long enough to need a sleep or rest. From 1944 to 1962, there were more than a dozen cases which supported what is sometimes called the Commissioner's “overnight rule” where he tried to draw the line by saying that you can't deduct meals unless you are away overnight. I think a more refined version of it is to call it the sleep or rest rule because cases that soon arose where taxpayers didn't necessarily sleep at night. The railroad conductor who took a long trip and took a room for rest during the day returning on an evening run, the Commissioner in 1940s said that if he was required to take the room, that he could deduct not only the cost of the room but also the meals. And the First Circuit Court of Appeals for some years ago held that whether he was required or not, if the length of the trip was such as to make it appropriate for him to seek rest in the course of the journey, he could deduct not only the cost of the lodging but also the meals. Beginning in 1948, the Commissioner made this very specific in two places, actually beginning in 1946 which is 21 years ago. And for the convenience of the Court, I printed the text of this in the reply brief which has been filed in the Correll case on page 11 of the reply brief are set out the instructions, the official instructions which the Commissioner has used with respect to Form 1040, the standard taxpayer return form. And since 1948, these instructions have always specified as indicated that near at the top of page 11, the last sentence of the indented quotation traveling “away from home” means going away from the city or town where you normally work and remaining away at least overnight. And you'll find that phrase at least overnight in all the rest of the instructions right down through 1966. The 1967 instructions I believe have not yet appeared. In addition the Commissioner puts out a booklet called “Your Federal Income Tax,” and since 1946, as quoted at the bottom of the page 12, this booklet has specifically referred to require his absence overnight, at top of page 13 from which he does not return the same day. The 1955 edition is quoted at the bottom of page 13 in the last full line and remaining away at least overnight. You then find some modification beginning in the 59 and the 63 editions where there is a reference to necessitate relief from duty to obtain sleep or to obtain necessary sleep showing the transition to the sleep or rest rule which seems to me to be inappropriate and thoroughly sound than refinement of the originally stated overnight rule. In 1954, the Internal Revenue Code was given a comprehensive revision. And there was some reference to this problem in three situations. In the first place at the hearings, a taxpayer appeared objected to the overnight rule and set it out to be changed. No change was made. I don't put great significance in that. I simply record it as one of the facts. Two amendments were made to the statute in 1954. One was the enactment of a Section 120 which specifically allowed a state policeman to deduct an amount of $5.00 a day and in the provision which is sent then repealed by Congress because it was found impossible to justify this special deduction for state policemen when such a deduction was not available for others. But in the Committee Report with respect to that, Congress referred specifically to the fact that the application of the statute at that time allowed for the deduction for meals while away from home overnight.
Hugo L. Black: What page is that recorded on in the agreement?
Erwin N. Griswold: That is on the -- this is on pages 17 and 18, and the exact quotation from the Committee Report is on page 18 about three inches from the top of the page for meals while away from home overnight, the overnight is printed in italics in the brief and those are italics, the Committee Report is simply printed in ordinary type. There was also another provision in 1954. This problem arises not only with respect to the deduction in Section 162, but in a somewhat mildly complicated way with respect to the determination of adjusted gross income which for practical purposes means whether you can get the deduction and also take the standard deduction of 10% of your income. And until 1954, because of the way the statute was worded, there was a difference wholly unjustified between the taxpayer who paid his own travel expenses and the taxpayer who was reimbursed by his employer with respect to the travel expenses. When Congress straightened that out in 1954 by an amendment to Section 622 (c) and again, the Committee Report expressly refers to the fact that the Commissioner's rule is away from home overnight. Now there was no official dissent from that view until 1962 when the Eighth Circuit Court of Appeal decided a case called Hanson. There was an earlier case in the First Circuit which uses a language to the effect that the Commissioner's construction of the statute is something that he dreamed up but actually the First Circuit case involved a railroad conductor who took a long trip to a distant place, took a room for sleep or rest, and came back. And as I've indicated the Commissioner has long since accepted that goes on the overnight rule. But it was the Hanson case in the Eighth Circuit which first threw uncertainty into that picture. I may mention just to complete the statutory history that in 1962, Section 162 was amended in a way which is not applicable here because the years involved here are 1960 and ‘61 but which is also clearly not relevant because what it did was simply to limit the deduction to amounts which are not leverage in amount and there's not suggestion that anything of that sort was involved. Finally in 1963, the treasury recommended to Congress that the statute be changed. This is referred to on pages 25 and 26 of the government's brief. The treasury suggested that the deduction be allowed where there was an absence of 16 hours or more and where substantial arrest was needed in connection with the travel. It also suggested that there be a duty area which would be a circle of 20 miles radius. Nothing came of this recommendation. It was not reported out of the Committee on Ways and Means. And I mentioned that simply to complete the story. Now, one can look at this statutory language and try to search out the “meaning of Congress.” And I would suggest that that is a rather illusory matter because I find it difficult to find any evidence that Congress ever thought about this detailed application of the statutory provision. I would like to suggest to the Court that this is essentially a case of tax administration. That Congress has committed the administration of this statute to the treasury has authorized the Commissioner to make appropriate rules and regulations and the Commissioner has made such rules and regulations. They might may or may not be the same as a Court would make as an original proposition. But my thought would be that unless the Court finds that this is an unreasonable or wholly inappropriate construction and application of the statute, it should be upheld. There are two problems, or there is a problem arising from the application of these two statutory provisions. I repeat, if there was Section 162 alone, I wouldn't doubt that these meal expenses would be deductible. If there was Section 262 alone, no deduction allowed for personal family and living expenses seems to me equally declare that the meal expenses would not be deductible. What you actually have then is the two statutory provisions; both obviously intended to be given some effect by Congress. And the problem is to work out a practical administrable way to give appropriate application to these provisions and I suggest to at the same time, to provide a measure of equality of treatment between taxpayers who are similarly situated.
Potter Stewart: I suppose if we had only Section 162 alone, somebody who commuted to Wall Street say from West District County or New Jersey or Connecticut or Long Island and had lunch down there would be able to do that, in fact even the commuter would, wouldn't he?
Erwin N. Griswold: That would certainly be arguable except that I think the ground upon which this Court put the Flowers decision, Commissioner against Flowers which was to the effect that the commuting expenses involved there arose not out of the business, but out of his personal choice, it might be negative, or that would be more difficult if there weren't any Section 262.
Byron R. White: But home in Flowers and some other cases may include your regular place of business.
Erwin N. Griswold: Sometimes it is said that what Flowers means is that home is your regular place of the business which it gave rise to the quip of the man kissing his wife goodbye in the morning and saying “Goodbye my love, I'm going home to work. I'll be back here this evening.” Obviously, there is a problem of construction here. I think everyone has agreed that the commuter's expenses ought not to be deductible. I suppose that the rest under Section 262, but it might also be regarded as a construction of all the ordinary and necessary expenses of carrying on the trade or business. The commuter's expenses might be regarded as not business expenses even if there were not section 262.
Potter Stewart: Or as Justice White suggests it might depend upon the definition of the word “home” when you're down at Wall Street and have lunch, you're not away from home.
Erwin N. Griswold: Well that's the -- if that is the effect which is to be given to Flowers, that home means principal place of business, that would be the situation. Now, it seems to me that there are two rather narrow grounds on which this case can be put. One is suggested by Judge Aldrich in the Bagley opinion. He says that the statute refers to meals and lodging, and that unless there's also lodging that maybe it can be argued that there's no deduction for meals. Another basis of dealing with the problem it seems to me would distinguish between the person who makes an occasional or sporadic business trip. The New York lawyer who has a case before this Court comes down to Washington, goes back the same evening on the one hand. And taxpayers like the present taxpayer who does it regularly as a matter of course. If the place of business, if home is the place of business, this taxpayer took his place of business along with him. Among other things, it's a little hard to see why this taxpayer should be allowed to deduct two meals, both breakfast and lunch, when the similar situated taxpayer, indeed some of his fellow employees who work only in one community, are not allowed to deduct either meal and while the ordinary taxpayer can't deduct his lunch because that is of course a personal family or living expense. The suggestion is made in some of the Court of Appeals decisions that each case must turn on its own facts that the questions must come up before the courts and be decided case by case. And I would suggest that that is a thoroughly unsound way to administer a tax system. Here we have a homely problem arising some 47 years after the statute was enacted, arising after some 20 years in which it was uniformly applied in decisions sustained by the courts, the problems arise only because the courts have sought to move into a problem which is essentially one of administration. And to say that this should be decided in each case by courts depending upon their separate facts as to use a phrase of my old colleague Professor Tomas Reed Powell to introduce a chaos of independent episodes instead of something approaching an orderly system. Of all kinds of questions that could arise, it seems to me that this is one which ought to be capable of determination in an orderly way that revenue agents and taxpayers can understand. I think that there are numerous rules which might be applied here time away, distance away, and so on. I don't see that anyone of them is any better than the rule of which the Commissioner has devised and has thought to apply over a long period of time. It would seem to me that sound and wise tax and judicial administration call for upholding the construction adopted by the Commissioner.
Abe Fortas: This puts a premium then Mr. Solicitor General on that going home at night, home being defined as where the wife is. Based in that this put a premium on that going home at night in the sense that if this man's work, the petitioner's work here were rearranged so that he spent the night and he may bring some whatever, some division or whatever it is, the neighboring town and if these deductions have been all right.
Erwin N. Griswold: There is no doubt that under this rule, the line is drawn at overnight or a sleep or rest. There's equally no doubt that there will be cases very close to any line that you draw which make those cases seemed very close together. Our position is that there is a difference. There is a point where a substantial additional cost is likely to be incurred in the general case when you are required to take lodging as well as meals. If -- one way to put it is as Your Honor did, he say that to put a premium on staying away overnight. Indeed in this very case, the Correll case, it appeared that some of the salesman had territories under which they did from time to time stay away overnight. And their entire cost of meals and lodging were allowed as deductions. Similarly in the Bagley case, it appeared that for one reason or another, at one of the jobs he went to which was rather closer than the others, or from 30 miles away. He did as a matter of course, stay overnight and the amount of his meals and lodging was allowed as a deduction. I wouldn't say that it could have premium on staying away overnight. I would say that the Commissioner has thought to recognize a place to draw the line where there is in the general case, a substantial distinction. And that staying overnight is such a distinction.
Speaker: Has the Commissioner's rather not rule at the section which is commonly used or what I could say is the --
Erwin N. Griswold: The Commissioner's overnight rule? No, on the contrary what the Commissioner did in 1963 was to suggest a 16-hour rule with rest required together with a 20-mile radius around the post of duty. And nothing fell flatter than that.
Earl Warren: Mr. Taylor?
William A. Taylor Jr.: Mr. Chief Justice, may it please this Court. To digest one moment and answer to Justice Fortas' question. I think the very essence of the overnight rule is contrary to the American business concept that a man is in business to make a profit. And yet to establish such a rule as the overnight rule, it does generate a man or make it more beneficial to him for the deduction of these expenses to stay away overnight which is --
Byron R. White: Well then, why would somebody would still make that -- without the (Inaudible)?
William A. Taylor Jr.: Well, sir --
Byron R. White: I don't get exactly what -- now, I (Inaudible)?
William A. Taylor Jr.: Well, most businessmen are very conscious of tax deductions today, Your Honor.
Byron R. White: (Inaudible) -- also I don't understand. You don't say (Inaudible)?
William A. Taylor Jr.: Yes, sir. I can see that point.
Byron R. White: Then, why would they -- why would they say open when they put $20.00 (Inaudible)?
William A. Taylor Jr.: I think that it might become a question of whether or not the salesman would push a little harder to get home versus whether or not he would be on the road and thereby know that his --
Byron R. White: (Inaudible)
William A. Taylor Jr.: Yes, sir, it does. But still the question involved though is contrary to the concept of American business profits because it does reduce these profits. And thereby the rule itself, the tax administration rule in my interpretation harbors.
Byron R. White: (Inaudible)
William A. Taylor Jr.: To -- at the risk of being someone repetitious I think it is essential that we commence with a great review of some of the facts which the petitioner has reviewed. First of all, I think that it is important to note that Mr. Correll does rise in a very early hour each morning and that he does travel a distance of approximately 50 miles each day before he reach in New York or makes any calls on any of customers.
Hugo L. Black: Is that required by his employer?
William A. Taylor Jr.: Yes, sir, it is. His employer requires that he'd be at a given location on a given morning at a given time. So that he may reach him for the purposes of giving him essential price data or other essential data in the course of fulfilling his duties as a salesman. That also is accomplished or is used because of the fact that he then may eat at a restaurant and make a call on this restaurant who is a customer of his at the same time. So he can search this time, he creates a goodwill element between himself and his customer. And he's there at the convenience of his employer, at the requirement of his employer. Excuse me.
Hugo L. Black: Did he required to eat with his customer?
William A. Taylor Jr.: Yes, sir. The record in the trial of this case demonstrates in the employers who testified that he was required to eat with his customers. That is both true at breakfast and at lunch. So we do see here that Mr. Correll's expenses for meals were business generated, not personal choices. I think that perhaps we ought to also distinguish the fact that Mr. Correll while he live in Fountain City, his entire route was away from his home area in Fountain City. And yet by comparison, his business, his employer was actually in Morristown, Tennessee which is some 35 or 40 miles away from Fountain City. However, he very infrequently ever traveled to Morristown conversing with his employer either by mail or by telephone. During the course of Mr. Correll's day, he of course would call on his various customers eating lunch again away from home on his route and then would complete his trip and return to his home in Fountain City between 5:30 and 6:00 PM in the afternoon of each day. He did not spend any nights away from home during these years in question.
Speaker: Did he get the question or bring into open?
William A. Taylor Jr.: No, sir. He ate with a customer, a restaurant upon whom he was making a call.
Speaker: 36.20
William A. Taylor Jr.: Yes, sir. He did not in effect entertain a customer in the process of buying his own breakfast or lunch. However, it can be clearly seen from these particular facts that Mr. Correll incurred his expenses as a result of his employment while in a travel status and while he was away from home. And I think that in using that word “home”, we must again differentiate between the idea of the commuter. He is definitely in the cases such as Flowers or James. I don't believe that is question involved in this particular case. In fact the Commissioner has never raised the question in this particular case as to whether or not Mr. Correll left his home. He has merely asserted that Mr. Correll has not remained away from his home long enough to be entitled to his meal deductions. Attorney --
Abe Fortas: What would you think Mr. Taylor the cost of the possibility and correctness of a construction of the phrase while he was away from home, in terms something like this if that was intended by Congress and feasibly construed to mean meals that were purchased in some non-customary in unusual place which differed the daily or almost so as a result of the requirements of the taxpayer's business.
William A. Taylor Jr.: That Your Honor is basically what the respondent would contend is the rule laid down by the statute. I would go a little farther and say that I think that the rule as laid down by the statute requires the Commissioner to determine whether or not, there is a legitimate travel status. And by that I mean that we must look to his business generated travel as to whether or not the man is traveling for business purposes and then secondly, whether or not he has moved away from his home in the course of his business travel.
Abe Fortas: Unless a suggestion adds to that, the idea that the necessity for taking meals in different places is incident through the pursuit of his trade or business. In other words I suppose that if someone working on Capitol Hill goes downtown for lunch that that is not deductible, even though he moved quite a distance.
William A. Taylor Jr.: Well sir, I don't believe in that particular incidence that the phrase “away from home” would comply in meeting the test for the deduction. I think that the code section is limiting in this respect that you must be away from your so-called tax home in order to obtain a meal deduction.
Abe Fortas: Being away from your tax home in one sense when you go to a neighborhood restaurant.
William A. Taylor Jr.: Yes, sir. But I believe that this Court has in effect by ruling such as in the Flowers case in the sense of commuter held in effect that the tax home is the general area and that comparison area where a person's business is permanently located or generally located. And I think that the respondent would concede the fact that the commuter's expenses are not deductible and under your construction. I'm not too here but what the commuter's expenses would be deductible.
Abe Fortas: Well, I'm trying though to agree that they should not be, could not be, but there was the idea of suggesting that the meals have to be taken in different places as an incident of the business.
William A. Taylor Jr.: Yes, sir. Plus --
Abe Fortas: I -- I might say that I do. I myself are having some difficulty with the facts of this particular case because there seemed to be -- this is bad, as you argue I can see your argument to the fact that this is a case where the man really have no option. They have to take these meals and they have to buy these meals in different places so as a result though, the necessities of his business and if he were have to buy these meals away from both of his residence and on office headquarters.
William A. Taylor Jr.: Yes, sir. I think there is another distinction here too that perhaps in looking at the overall in ten of various code sections, when reading 162 in conjunction with Section 62, we say that Congress has intended to categorize a person in a travel status versus a person who is not in a travel status. Under Section 62, in order to determine what the phrase “adjusted gross income,” the code section entitles the person to deduct travel expenses incurred while away from home under I think its 62 (b). And under 62 (c), it entitles a person who is traveling in and around a local area only transportation expenses. As a matter of fact, the Commissioner's regulations actually, and I have them here, actually point out that there is a distinction under his regulation 1.62-1 subparagraph G, and I quote this “transportation as used in Section 622 (c) is a narrow concept in travel” as used in Section 622 (b) which is speaking of the expenses away from home and does not include meals and lodging. The term “transportation expense” includes only the cost of transporting the employee from one place to another in the course of his employment while he is not away from home in a travel status.
Abe Fortas: I think the new and your brief or perhaps it's the opinion of the court below point out that these days while you're in New York for example could travel to San Francisco in business, got to one of the restaurants there and buy a meal and come back the same night.
William A. Taylor Jr.: Yes, sir.
Abe Fortas: And you can do that quite often.
William A. Taylor Jr.: It would be our contention that this would be a travel expenses as long as the trip were business generated.
Abe Fortas: Yes.
William A. Taylor Jr.: And it would be fully deductible under the code section.
Abe Fortas: As you understand the Commissioner's ruling that literally in a way that the Commissioner couldn't find that, that would not be deductible.
William A. Taylor Jr.: Yes, sir. That's true. That's the current policy of the Commissioner.
Earl Warren: Mr. Taylor, when you said that he was required to have breakfast with his customers, you mean that he was required to actually have breakfast with them or just to eat at one of those places of business.
William A. Taylor Jr.: Those are his employer requested that he eat with a given customer. You see, Mr. Correll sold wholesale groceries both to institutional and retail outlets. And he was requested that he take his meals with one of this institutional customers and restaurant so that in effect, the restaurant would see that he was being patronized by men who wanted to sell it, and secondly, because the employer wanting to be able to know where he was at a given time so that he could reach him by telephone.
Earl Warren: Does this -- does that mean that he was to sit down and actually have breakfast with the customer or just at his place of business?
William A. Taylor Jr.: Oh, I'm sorry. I misunderstood your question. No, just at his place of business.
Earl Warren: Well, that's what I want to know. Now, supposed he wanted to wake his wife up at 4:30 or 5 o'clock in the morning and have her prepare breakfast, could he have done that?
William A. Taylor Jr.: He would still have to be --
Earl Warren: Or he still have to let his wife sleep, is that the reason that he go for an hour before he had his breakfast?
William A. Taylor Jr.: Well of course, we'll have to consider the point that he did not want. I believe the proof and the record shows that he did not want to get his family up in such an early hour.
Speaker: Jeopardize his happy relationship.
William A. Taylor Jr.: Yes, a home to come on to.
Speaker: Then you might not get in there.
William A. Taylor Jr.: If he got her up too often, I'm sure he would not.
Earl Warren: Well, is that a vital thing, the hour that he did this because we have some business places that go around the clock with some men or to work at midnight. And if he chose to -- if that man going to work at midnight chose to eat in the restaurant rather than to have his wife cook the meal for him at midnight, that should be taken as factors.
William A. Taylor Jr.: No, sir. I -- I agree with Court in trying with that respect. But our contention is not hinged upon the question of the hour or really upon the question of the time that he's away. Our contention is the rule as laid down by the statute under 162 says that it's a travel status. And until this is determined, the meals nor the lodging, nor anything else in connection with this trip is a legitimate deduction under Revenue Code.
Earl Warren: Yes.
Potter Stewart: Do you rely in this case on a particular fact of your case, the fact that your client was required by his employer to eat at these specific places or are you making a general attack upon the Commissioner's rest or sleep rule?
William A. Taylor Jr.: Well, of course, we'll have to say in benefit of our client, we were relying upon on the --
Potter Stewart: You're trying to win your case on how you can, I know that.
William A. Taylor Jr.: Yes, sir.
Potter Stewart: But I hadn't understood -- hadn't understood in reading your brief that you were relying on a particular specific perhaps peculiar facts of your case in so far as your client was required by his employer to have his lunch and his breakfast at particular places. I don't understand that you make any claim that it was any more expensive for example.
William A. Taylor Jr.: No, sir.
Potter Stewart: For him to have lunch or breakfast there than it would have been anywhere else than any normal place.
William A. Taylor Jr.: The business generated expense and I think that the petitioner has clearly pointed this out that the intent of the statute when it was originally placed in the Code in 1921, was to entitle such man into travel status to the entire amount of his meal and lodging, irrespective of whether or not it audit was in excess of or less than what he would have incurred.
Potter Stewart: Whatever the day is, that if he is away, it's the entire amount.
William A. Taylor Jr.: Yes, sir.
Potter Stewart: The earlier rule at least asserted by the Commissioner was that only part that represented the difference between what he spent when he was away and what he would have spent when he was at home --
William A. Taylor Jr.: But in 19 --
Potter Stewart: -- that's out of the picture, now it has been since 1921.
William A. Taylor Jr.: Right sir. But -- but when they change it in 1921, in effect and since that time, the indication as we interpret it though; would be that as long as he's in a travel status, the full amount is deductible irrespective of whether or not there's an excess of his home expenses.
Potter Stewart: I believe there's no dispute about that, but you're not in this case planning that the places where this man did in fact have breakfast and lunch cost and to pay anymore money than he would have paid --
William A. Taylor Jr.: No, sir.
Potter Stewart: --here any other --
William A. Taylor Jr.: No, sir.
Potter Stewart: -- place that he might go.
William A. Taylor Jr.: No, we did not contend that.
Potter Stewart: I thought so.
William A. Taylor Jr.: No, sir.
Hugo L. Black: Do you mean it wouldn't have cost him to pay anymore than he would at home? I don't --
William A. Taylor Jr.: No, sir.
Hugo L. Black: -- think we take the judicial knowledge that it's probably a little cheaper when he eats at home.
William A. Taylor Jr.: Well, it perhaps is but there was no proof I think at the trial and the respondent did not rely upon that as an element improving his case. The -- the respondent relies up on the fact that he was in a legitimate travel status. And as such the meal expense was deducted.
Hugo L. Black: But you treat this just as all and a man who had to get to work at 9 o'clock in the morning but he chose to get away a little early and eat away from home? How would you consider that as one element of the case? In fact, he had to get up at 4:30 and that's too early for a wife to get breakfast, that's the rule.
William A. Taylor Jr.: Oh, I think Mr. Correll's instance, it's an element involved because the fact that he had to be at a given location at a given time. A -- a man who is at home and maybe gets up a little early to be somewhere a little early unless it is business generated, unless it also goes so far as to be away from home in a travel status would not come onto this particular route. In Mr. Correll's case, he was fortunate enough not only be required to get up by his employer, excuse me, and be away from home in an early hour, but he did travel approximately 50 miles in a legitimate travel status generated for business reasons. So we contend that that is a clear distinction in his case versus the example which you get.
Earl Warren: Mr. Taylor, pursuing Mr. Justice Stewart's questions a little further, do you contend that you're entitled to judgment just because of these specific facts that applied to this specific sales? Or do you feel that the other 17 salesmen, I understood they're 18 or something like that.
William A. Taylor Jr.: Something like that. Yes, sir.
Earl Warren: Who have different routes and different customers started at a little different time and so forth, would be -- do you contend that they would be coming out of the blanket too or do you think that this should be differentiated from each of those other men because of the peculiar facts of this case?
William A. Taylor Jr.: Your Honor, I have to answer the question in this respect. The peculiar facts of this case of course, would determine Mr. Correll's incidence a deductible item. However, I think we would have to examine each case up on its own facts to see whether or not each of these men we're in a legitimate travel status. The point which has been made by the petitioner here that the rule that each case must determine up on its own facts is not workable administratively. Then in effect by his own admission, that all of the deduction sections in the Internal Revenue Code are not workable. Because as a common knowledge, practically every code when interpreting a code section pertaining to especially Section 162 expenses. They have premise their findings that it is always based upon the facts of each individual case. And I do not see how did that within itself would make our contentions unworkable as far as the Commissioner is concerned.
Earl Warren: But what I -- what I was interested in is this, what did under your theory would the Commissioner have to determine that each case standing up on this particular facts and given the fact that we have hundreds of thousands maybe millions of people who commute each day. Some of them 30, 40, 50 miles each way and they eat on the train or coming to work, or they eat at the restaurant when they get there rather than disturb their household with their children and their wives early in the morning. Now, he has to consider whether they came 20 miles or 30 miles or where they went to work at 9 o'clock or went to work at 6 o'clock or whatever it might be? Do you think that that's a workable rule that we would have to whether we should have them consider?
William A. Taylor Jr.: Yes, Your Honor. To be specific, I contend that each individual case would have to stand up on its own facts under Section 162(a) (2). I think that the implementation of this section is further made easier by Section 274 of the Internal Revenue Code wherein certain substantiation of business generated expenses must be kept according to records and receipts. And I think that this in itself indicates that Congress intended that all of these expenses would have to rest upon their own facts. And I think that the very essence of our Tax Administration System in that we must file our own tax return. And that only if it's audited there's the question come up. Practically speaking, it solves your problem a great deal. But I think that to answer specifically, they would have to rest up on its own facts. I think that perhaps I should direct a few remarks to the case of Bagley which was decided in the First Circuit subsequently to the decision of Six Circuit in Correll. I think unquestionably that the government's contentions carried great weight with Justice Aldrich his decision of that case. However, I think that Justice Aldrich assumed that some rule had to be established and since the Sixth or the Eighth Circuits actually specified in so many words a clear rule other than what statute read, they as a matter of convenience adopted the Commissioner's rule. However, for the sake of argument here today, I'm not saying that the Commissioner's rule is the rule of convenience. But conceding for the sake of argument that it is, it is at the respondent's contention that even if it is the most workable rule that is possible, without an expressed authorization in Section 162 as to sleep or rest or as to overnight then, I do not believe that this Court or any Court can apply just because it is administratively convenient because the law does not specify. It does not give the Commissioner the power to administer such a rule.
Earl Warren: That's giving the part to issue regulations so that shifting to the administration.
William A. Taylor Jr.: Yes, sir. And under the regulations however, the Commissioner has made no reference to the overnight rule. In the substantive regulations under Section 162, there is no specification that the overnight rule is enforced to entitle man to a deduction. There are other references to it in the administrative regulations pertaining to keeping the records but nowhere in the substantive portion of the regulations is there a reference to the overnight rule. I think that was pointed out in the Tax Court's opinion in Bagley which by the way reversed as the petitioner has pointed out, reversed a very long standing rule of the Tax Court, and rule in favor of the taxpayer. And then Justice Aldrich in the First Circuit turned it around again and put it back in.
Potter Stewart: I suppose Mr. Taylor; in answer to my earlier questioning your position would be this. But first of all, you'll have to persuade the Court to invalidate the previous very well settled overnight rule or to be a little more accurate to the sleep or rest rule because until that's invalidated, you can't possibly win. And only if it's invalidated, can you win. But even after it's invalidated, then you have to go along -- on and say that in your particular case, judge done its particular facts, these are business expenses and not personal expenses. Then that's the reason I expected to emphasize the particular facts of your case. But it's a two-strip argument that you necessarily have to make I suppose, isn't that true?
William A. Taylor Jr.: Yes, Your Honor. Except that you use the word “invalidate” the Commissioner's rule.
Potter Stewart: Well, a well settled practice that needs to have been settled in 1962 was the earliest.
William A. Taylor Jr.: Yes, sir. I have to admit that he has interpreted this for a number of years. Of course, the question of whether or not it was actually law or should be law is another matter for this Court to determine. But I would say that basically our rule is that again repeating is the fact that we must ascertain whether or not it is a legitimate travel status. And it was generated for business purposes. And that the expenses were incurred away from home which in Mr. Correll's case, we contend was clearly the case.
Potter Stewart: And this would require a case by case approach which clearly was not.
William A. Taylor Jr.: Yes, sir. And I think that that was the intent --
Potter Stewart: Taxpayer by taxpayer.
William A. Taylor Jr.: Taxpayer by taxpayer, all of each individual return.
Hugo L. Black: In fact, that there was a time a man has to leave home is uncommon everyday circumstances and element determining whether he should be traveling.
William A. Taylor Jr.: Yes, Your Honor. The very nature of the trial and whether or not, he is generated for business purposes throughout the code sections is constant. They're constantly setting up circumstances where the facts of each case must determine whether or not it is a business deduction. And we contend that that is a reasonable rule and it's a rule which has been enforced since the Revenue Code has been adopted. In closing, the respondent would like to urge this Court to adopt the rule of the legitimate trial status because we contend that this rule is founded in the statute. That this rule was distinguished between the commuter who comes from his home in Connecticut to the New York City in his office, and the man who gets on a jet liner and flies from New York to Chicago and has lunch and comes back. Or it would distinguish between a situation of Mr. Correll's one day travel where his expenses are generated for business purposes. And we believe that this rule does not involve an artificial construction of Section 162 wherein the word “overnight” or sleep or rest is superimposed in that section. And by virtue of this, that the code section would be construed and it's clear, and it's an ambiguous meaning, and thereby would be according to the intent of Congress. Thank you.