Opinion ID: 3064659
Heading Depth: 4
Heading Rank: 2

Heading: Tug and barge mariners

Text: [11] Kapp argues that claiming the mariner’s tax deduction for tug and barge mariners was reasonable because Johnson applied only to deep sea mariners. He contends that taking the deduction on behalf of tug and barge mariners, who return to port more frequently, presented novel issues. Although the Johnson case arose from a slightly different factual situation, the principles of the Tax Court’s holding clearly extend to tug and barge mariners. The essence of the court’s holding is that individuals may not deduct the full M&IE rate when they do not incur meal expenses. Johnson, 115 T.C. at 227. By extension, if tug and barge mariners do not incur meal expenses, they may not take a deduction. The frequency of a mariner’s return to port is irrelevant to the holding of the case. [12] A memorandum prepared by an associate of Kapp’s lawyer Perez concluded there was little support for Kapp’s position that tug and barge mariners could deduct meal expenses when no cost was incurred. Although Kapp claims that he asked Perez to play “devil’s advocate” and draft a memorandum that laid out the arguments in opposition to his position, the memorandum presents an even-handed examination of the issues and states that “little if any authority relied on by Mr. Kapp supports the position that he takes.” After thoroughly analyzing a host of Tax Court cases and IRS publications, the memorandum concludes that although the “analysis does not foreclose the possibility that Mr. Kapp could ultimately be successful on the issue . . . . it appears to me that the weight of authority favors the Government on this issue.” Shortly after the date of this memorandum, Perez wrote a letUNITED STATES v. KAPP 5151 ter to Campos stating that although Kapp did not agree with the position taken by the IRS, he agreed to stop claiming the deduction. [13] Additionally, in two rulings issued after the district court entered the injunction against Kapp, the Tax Court rejected the contention that tug and barge mariners were entitled to deduct the full M&IE allowance when no meal costs were incurred. Zbylut, 95 T.C.M. (CCH) at 1175; Balla, 95 T.C.M. (CCH) at 1093.6 While we cannot evaluate the reasonableness of Kapp’s position in light of these rulings issued after the IRS investigation, it is worth noting that the Tax Court stated that the issues presented were not novel, and relied heavily on the reasoning in Johnson to reach its conclusion. Zbylut, 95 T.C.M. (CCH) at 1175; Balla, 95 T.C.M. (CCH) at 1093. [14] Although there was no precedent at the time Kapp prepared the returns that specifically stated tug and barge mariners may not claim the mariner’s tax deduction, a wellinformed analysis by a person knowledgeable in tax law would have led to the conclusion that Kapp’s position had less than a one in three chance of being sustained on the merits. Therefore, his position was unreasonable and not supported by substantial authority. 6 Kapp argues that these cases are distinguishable because the court found that neither taxpayer worked on board a common carrier. Therefore, they could not benefit from the provisions of 41 C.F.R. § 301-11.17, which provides that common carrier meals are not counted against the federal M&IE rate. As explained above, however, the common carrier exception only comes into play if the taxpayer is entitled to a per diem deduction for travel expenses in the first place, i.e., pays or incurs some travel related expenses. 5152 UNITED STATES v. KAPP