Court Opinion

ID: 4483026
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:50.707418+00
Date Added: 2024-06-11T14:38:47.320178
License: Public Domain

Dawson, C.J., dissenting: Notwithstanding the reversals by the Courts of Appeals of our prior opinions in Jon F. Hartung, 55 T.C. 1 (1970), and Richard L. Markus, T.C. Memo. 1971-313,1 respectfully dissent from the majority opinion in this case. I would adhere to the position previously taken by this Court. In my judgment a sufficient nexus does not exist between the moving expenses in question and the income subsequently earned by petitioners to warrant the majority’s view that they are “closely related to pétitioner’s trade or business and the production of gross income,” and subject to allocation between taxable and tax-exempt income. Prior to the enactment of section 217 this Court classified moving expenses as nondeductible personal expenses. Lloyd G. Jones, 54 T.C. 734 (1970), affd. 444 F. 2d 508 (5th Cir. 1971). Section 217 now permits their deduction if the taxpayer begins work after the move at a “new principal place of work” as long as the move, subsequent employment, and expenses deducted fall within certain guidelines. The majority concludes that the inclusion by Congress of this postmove employment requirement in section 217 creates an altogether new relationship between moving expenses and income subsequently earned. In Lloyd G. Jones, supra at 741, we adopted the position that moving expenses were not ordinary and necessary expenses of a taxpayer’s trade or business. Our earlier opinions holding they were business expenses were reversed. See Wilson v. Commissioner, 412 F. 2d 314 (6th Cir. 1969), revg. 49 T.C. 406 (1968); Commissioner v. Dodd, 410 F. 2d 132 (5th Cir. 1969), revg. a Memorandum Opinion of this Court; Commissioner v. Mendel, 351 F. 2d 580 (4th Cir. 1965), revg. 41 T.C. 32 (1963). The Court of Appeals for the Fourth Circuit had stated in Mendel at 583 that: “The conclusion is inescapable that such expenditures were ‘personal, living or family expenses’ of the taxpayer, expressly made non-deductible by §262 of the Code.” Section 217 then was enacted, allowing a deduction for personal expenses theretofore nondeductible. Underlying this deduction’s creation was a congressional desire to remove a deterrent to labor mobility, moving expenses, which would in turn assist in reducing local structural unemployment. H. Rept. No. 749, 88th Cong., 1st Sess. (1963), 1964-1 C.B. (Part 2) 125, 183. Congress, not wanting to allow such a deduction to any taxpayer electing to move, limited this personal expense deduction to those moving for the purpose of living near their new place of employment. The majority finds now, however, that .section 217 does more than. Congress intended. It finds that moving expenses, regardless of amount, now “have a definite relationship to the production of gross income” and have become “income related” rather than personal by virtue of this section’s enactment. Utilizing a sine qua non approach, the majority categorizes these “income related” expenses as either deductible or nondeductible depending upon whether the taxpayer’s subsequent earnings are exempt from Federal income tax. Moreover, the majority draws support for its position from the fact that moving expense deductions are taken when computing adjusted gross income rather than as an itemized deduction utilized when computing taxable income. The relevant cases, the Code sections, the regulations, and the legislative history behind sections 217 and 911 lead me to a contrary conclusion. I think section 217 provides qualifying taxpayers with a deduction for personal expenses which are not related to the income from a trade or business, despite the language in section 217 which conditions its benefits on postmove employment. This language was included only to limit the section’s coverage to taxpayers who are a part of the work force after their move. The overriding concern of Congress was to remove a hinderance to labor mobility. This conclusion does nothing to contravene the operation of section 911, which was enacted to promote foreign trade by encouraging American businessmen to venture overseas and sell American-made products. Cecil A. Donaldson, 51 T.C. 830, 836 (1969). Any removal of a hinderance to mobility should complement section 911. The fact that section 217 deductions are taken when computing adjusted gross income does not convince me that they are' “income-related.” The majority relies upon committee reports stating that “these expenses are substantially similar to business expenses.” H. Rept. No. 749, 88th Cong., 1st Sess. (1963), 1964-1 C.B. (Part 2) 125, 184; S. Rept. No. 830, 88th Cong., 2d Sess. (1964), 1964-1 C.B. (Part 2) 505, 576. The Senate report reveals a more compelling reason underlying this placement: These expenses, therefore, are deductible whether the individual involved itemizes his personal deductions or takes the standard deduction. This treatment is provided not only because these expenses are substantially similar to business expenses, but also because when they are incurred, they are likely to be relatively large. In such cases, it was thought that it would be undesirable to, in effect, make taxpayers choose between taking this deduction and the standard deduction in lieu of itemized personal deductions. [S. Rept. No. 830, 88th Cong., 2d Sess. (1964), 1964-1 (Part 2) C.B. 505, 576.] It is my opinion that if Congress intended to characterize moving expenses as business expenses, thus changing the predominant judicial view then in effect, see Lloyd G. Jones, supra, it more likely would have stated its intention to do so in the committee reports and included the moving expense deduction under section 62(2), “Trade and Business Deductions of Employees,” rather than providing a separate section, section 62(8), “Moving Expense Deduction.” Furthermore, Congress included the deduction for moving expenses under part VII, subtitle A, “Additional Itemized Deductions for Individuals” rather than under part VI, “Itemized Deductions for Individuals and Corporations,” where trade and business expenses are allowed. I do not find the majority’s analogy to the employment agency fees in David J. Primuth, 54 T.C. 374 (1970), to be persuasive. That case is distinguishable from this case because this petitioner is seeking to take a deduction now specifically authorized by statute which formerly was denied in that statute’s absence; while in the Primuth case we were called upon to decide whether specific expenses fell within the broad, inclusive language of section 162(a) without guidance from Congress. Moreover, in light of the decisions by the Courts of Appeals that moving expenses are personal, I would not extend here our holding in Primuth. It should also be pointed out that under the majority’s view similarly situated high- and low-income taxpayers will receive different benefits under section 217. In his reply brief respondent indicated that he will follow Rev. Rul. 75-84, 1975-11 I.R.B. 8, in determining the nondeductible portion of petitioners’ moving expenses. Pursuant to that ruling moving expenses are multiplied by a fraction in which the numerator is total exempt income during the taxable and following years and the denominator is total earned income during the same time span. A taxpayer who never earns moré during this period than he may exclude under section 911(a) must bear the burden of all moving expenses, while a taxpayer with large quantities of earned income over and above the exclusion may ease his moving expense burden with tax deductions. Indeed, under this formula the highest bracket taxpayer may deduct the most moving expenses. I would allow all qualifying taxpayers to deduct all of their moving expenses. Although high-bracket taxpayers still would benefit the most, those in the low brackets would not lose all of their deductions. If •Congress intended a different result, it should correct the present situation. Accordingly, I would hold that Mr. Hughes is entitled to deduct fully his moving expenses incurred under section 217. Forrester, Scott, Fay, Goffe, Hall, and Wiles, JJ., agree with this dissent.