Court Opinion

ID: 4483133
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:15:54.723679+00
Date Added: 2024-06-11T14:53:40.794592
License: Public Domain

Dawson, C.J., dissenting on Issue 1:1 respectfully dissent from the majority’s disallowance of the petitioner’s home office expense deduction under section 162(a), I.R.C. 1954. I would adhere to the position previously taken by this Court in Stephen A. Bodzin, 60 T.C. 820 (1973), and not follow its reversal by the Court of Appeals for the Fourth Circuit. The majority acknowledges that the Supreme Court has used an “appropriate and helpful” test, see Welch v. Helvering, 290 U.S. Ill (1933), when determining whether a claimed expense is “necessary.” They find, however, that sections 262 of the Code and 1.262-l(b)(3), Income Tax Regs., operate to bar any home office deduction if the taxpayer habitually performs a more significant amount of work elsewhere at a “place of business.” Although this regulation is, at first glance, susceptible to such an interpretation, I believe that the majority position will prove to be more restrictive in practice than Congress has intended. I do not interpret the use of the phrase “incidentally performs, business there” in section 1.262-l(b)(3), Income Tax Regs., to indicate that the taxpayer’s primary place of business must be located within his residence in order to qualify for the deduction in issue. Home office expenses unquestionably are deductible under section 162(a) in cases where the employee has no other office or where the taxpayer’s duties may be performed more readily at home than at his designated office. See Newi v. Commissioner, 432 F.2d 998 (2d Cir. 1970); Clarence Peiss, 40 T.C. 78 (1963). At the other end of this spectrum they are nondeductible if they are not both appropriate and helpful. Welch v. Helvering, supra. However, section 162(a) sanctions other deductions falling between the extremes of this continuum, even if the expenses they represent are not specifically mandated by the exigencies of the taxpayer’s business. In this way section 162(a) grants taxpayers some leeway in the conduct of their business affairs. This petitioner’s profession as a lawyer seemingly demanded more hours of work per week than he was required to remain in his employer’s office. He conscientiously performed a substantial portion of his duties at home in an area used primarily for such legal work. Thus, I would allow the claimed deduction as long as his use of the facilities significantly furthered the conduct of his professional affairs, even though there was no compelling business reason requiring him to work at home. I find interposed between “primary” and “incidental” a category of business effort properly entitled “substantial” or “significant” which qualifies this deduction under section 162. We cannot disregard 15 or 20 hours of additional effort per week when a regular workweek for the taxpayer consists of only 40 hours. Accordingly, I would permit the instant deduction whenever a taxpayer could prove that he expended more than an incidental amount of effort in his home office. The majority’s position is far too sweeping in its denial of deductions for ordinary and necessary business expenses. Many peripheral decisions by employees take convenience into consideration, but its presence in the decision-making process does not alter the nature of the work being performed. I think the majority has unduly relied upon this element in reaching its decision. Certainly the most appropriate solution to this controversy would be an unequivocal statement from the Congress. Section 162(a) was drafted and enacted in general terms in accordance with a congressional intention that the judiciary give more concrete meaning to those terms on a case-by-case basis. Nevertheless, when cases turn on congressional intent and the judiciary cannot agree, Congress should step in and resolve the issue. If a new and more restrictive test for business expenses is needed, then it should be imposed by the Congress, not by the judiciary. STERRETTand Goffe, JJ., agree with this dissent.