Court Opinion

ID: 4622820
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:51:35.846465+00
Date Added: 2024-06-11T07:56:14.410784
License: Public Domain

JOE MAY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.May v. CommissionerDocket No. 91874.United States Board of Tax Appeals39 B.T.A. 946; 1939 BTA LEXIS 948; May 23, 1939, Promulgated *948  1.  Petitioner, living in California under a visitor's visa and actively engaged during the taxable year in attempting to secure required data for application for naturalization, held, to be a resident of California, and entitled to return his income from salary on a community property basis.  He is entitled to a personal exemption of $2,500.  2.  Amounts expended for entertainment, automobile operating costs, and telephone, telegraph, and cable charges, held, ordinary and necessary business expenses.  Frederic A. Pike, C.P.A., for the petitioner.  E. A. Tonjes, Esq., for the respondent.  VAN FOSSAN *947  This proceeding was brought for the redetermination of a deficiency in income tax for the year 1934 in the sum of $2,764.09.  All but $45.61 of this amount is in controversy.  The issues are: :1) Does the fact that the petitioner and his wife were in the United States under visitors' visas prevent their reporting the petitioner's salary income on a community property basis?  :2) Was the petitioner entitled to a personal exemption of $2,500 during the period from January 1 to November 23, 1934?  (3) Was the petitioner entitled*949  to deduct as business and professional expenses certain amounts expended for the operation of automobiles, entertainment costs, and telephone, telegraph, and cable service and tolls?  FINDINGS OF FACT.  The petitioner was born in Vienna, Austria, in 1880, of Jewish parentage.  He resided in Germany from 1910 to March 31, 1933, when he went to France on account of a boycott against Jews, his wife, a Gentile, being fearful for his safety.  He left all his property in Germany and has been unable to recover anything from it.  The petitioner traveled in France and England looking for employment.  In October 1933, while in Paris, he received through its London representative a cabled offer of employment with the Columbia Pictures, Inc., a motion picture company in Hollywood, California.  The Columbia representative advised and required the immediate departure of the petitioner and his wife, and, in order to save time, arranged to secure visitors' visas to the United States instead of having them entered under the quota.  When he applied for the visa the petitioner asserted that he intended to visit the United States for six months and, upon its renewal, June 5, 1934, a similar representation*950  sentation was made.  The petitioner and his wife entered the United States on December 5, 1933.  On December 15, 1933, he signed a contract with Columbia for employment for six months, with renewal options exercisable by the company, to serve as a motion picture director and as a collaborator and writer of motion picture scripts.  He began work on December 15, but the contract was terminated in May 1934, by mutual consent, in order to enable him to work for the Fox Film Corporation under single picture contracts.  During the remainder of 1934 he was employed by the Fox Company and did not seek or negotiate employment outside of California.  *948  Immediately after signing his contract with Columbia the petitioner gave an agent his order to secure a dwelling house.  The petitioner and his wife soon rented a house into which they moved on December 31, 1933, and in which they lived during 1934.  They did not leave California during 1934 except to go to Mexico for the purpose of reentering the United States under the Austrian quota to become citizens of this country.  At the beginning of January 1934 the petitioner desired to become an American citizen.  He discussed the situation*951  with his English teacher, who was familiar with naturalization procedure and represented those who sought naturalization.  During the first part of January the petitioner employed his teacher to take the necessary steps to that end.  On January 25, 1934, he wrote to his lawyer in Vienna to secure the records and data required as a basis for his application for citizenship.  In that letter he stated that he intended to make the United States his permanent home.  On the same day he wrote to the Berlin Police Department for the prescribed police clearance.  Many tedious delays and obstacles prevented the prompt accomplishment of his object.  The Berlin Police Department refused a clearance, claiming that he owed delinquent taxes.  The petitioner obtained from the immigration authorities a waiver of certain requirements and eventually secured the necessary documents.  As soon thereafter as he was able to leave his work, he and his wife went to Mexico and reentered the United States on November 23, 1934, having been assigned a number under the Austrian quota.  On the same day he applied for citizenship papers, and expects to become naturalized on November 23, 1939.  Since January 1934*952  it has been his constant intention to become a citizen of the United States.  Following the making of in 1935, he remained in Hollywood for one and one-half years without employment.  The petitioner used automobiles to travel from his home to the studio which employed him.  The services for which he was paid were performed at both his home and the studio.  He averaged two round trips a day.  In the forenoon he worked at his home with collaborating writers, drove to the studio to discuss the previous day's script and returned to work again with the writers.  In the afternoon he went to the studio to arrange for casting, actors, etc.  It was two or three miles from the petitioner's home to Columbia studio and from four to five miles to the Fox studio.  The petitioner used his automobile for frequent trips to see producers, actors, agents, and previews.  He and his wife also used the automobile for their personal needs.  The petitioner owned a Nash automobile, for which he paid $2,488.76 on January 19, 1934, and which he exchanged in December 1936, receiving *949  credit for $400.  Depreciation for 11 1/2 months of the taxable year amounted to $686.30.  He also owned a Ford*953  automobile, for which he paid $902.  The date of acquisition, the rate and amount of depreciation on the Ford were not proved.  During the year 1934 the petitioner expended $494.34 for rental, repairs, and operating expenses of automobiles and $165 for interest and insurance on automobiles.  The petitioner expended $346.86 for telephone tolls and service and $607.21 for telegraph and cable charges.  Fifty percent of such expenses were for business purposes.  The petitioner entertained at his home persons prominent in the moving picture industry, primarily for the purpose of making contacts which would result in business advantages to him and in future employment.  He expended a total of $1,271.85 in such activities.  He claimed $1,076.64 as a business expense.  OPINION.  VAN FOSSAN: The first issue presents the question of the right of the petitioner to return his income under the community property laws of California while he was living in that state by the grace of a visitor's visa.  The petitioner contends that such laws do not discriminate against aliens, resident or nonresident, but grant them the same rights as those enjoyed by citizens of California.  He insists, however, *954  that he was a resident of that state and that, in harmony with his intent to become a citizen of the United States, he had done his utmost to perfect his application for citizenship under the immigration laws and procedure.  The respondent's position is that the petitioner did not become a resident of California and was not domiciled in that state until November 23, 1934, the day on which he entered the United States as an immigrant under the Austrian quota.  The respondent cites the Political Code of California, Title ii, section 52, 1 defining the term was not the the union of act and intent could not exist until after he entered the *950 United States as a quota immigrant.  The respondent also asserts that the petitioner is bound by his representations made to secure his visitor's visa.  *955  The community property laws of California do not specifically exclude a resident or nonresident alien from its benefits.  The facts before us clearly establish that the petitioner was a resident of California during 1934 within the definition of section 52.  It is beyond doubt that the petitioner's intent and purpose were to become an American citizen.  His original entry into the United States was accomplished through a visitor's visa only because his immediate presence in Hollywood was vital to his securing a contract with Columbia.  Almost immediately on arrival in California, i.e., early in January 1934, he discussed with his English teacher ways and means of entering the country under a quota and he employed her to supervise his various moves to that end.  The intent, outset of his residence in Hollywood and continued until November 23, 1934, when he accomplished his desire and entered under the Austrian quota.  We note that on the same day, he made application for citizenship papers and that he remained in Hollywood for over a year without employment.  His entire conduct and behavior were consistent with his professed intention of remaining in California and becoming an*956  American citizen.  The respondent contends that the fact that the petitioner was living in California under a visitor's visa automatically made it impossible for him to have an the same situation in , in which we held that the petitioner's entry under as visitor's visa did not affect his status as a resident alien.  There we said that he had adopted that course on consular advice and that his explanation of the reason therefor seemed reasonabel.  In the case at bar the petitioner's explanation for his securing a visitor's visa is likewise reasonable and convincing. The petitioner is entitled to return his income derived from salary on a community property basis under the laws of California.  Our decision on the first issue also determines the disposition of the second issue.  The petitioner is entitled to a personal exemption of $2,500.  The third issue involves claims for the deduction of various expenditures as ordinary and necessary business expenses.  In Cohan v. Commissioner, 39 Fed.:2d) 540, the court, in discussing the duty of the Board in situations where exact proof is lacking, stated: *951  * * * *957  The Board should make as close an approximation as it can, bearing heavily if it chooses upon the taxpayer whose inexactitude is of his own making.  The petitioner is a motion picture director and writer.  His popularity and success upon coming to this country, resulting in a future demand for his services, were dependent in no small measure upon personal contacts made with prominent individuals of the motion picture industry.  The expenditures made in the taxable year were very largely for business reasons.  Of total expense of $1,271.85 proved, the sum of $1,076.64 claimed in petitioner's return is a reasonable approximation and is allowed as business expense.  The petitioner owned two automobiles which he used partly for pleasure and partly in his professional work.  In his tax return he claimed as business expense 50 percent of all automobile expense, or $615.02, itemized as to depreciation and upkeep.  This sum has been reasonably substantiated and is an allowable deduction.  The petitioner claimed expenditures of $1,245.77 for telephone, telegraph, and cable services in his tax return, of which he allocated 50 percent to his business and profession.  At the hearing he established*958  total expenditures of $954.07 for such purposes, but claimed a greater proportion to be attributable to business.  The variation in the estimates was not explained.  We approve the original allocation.  The sum of $477.03 has been supported and is an allowable deduction.  Decision will be entered under Rule 50.Footnotes1. Sec. 52.  Residence, rules for determining.Every person has, in law, a residence.  In determining the place of residence the following rules are to be observed: 1.  It is the place where one remains when not called elsewhere for labor or other special or temporary purpose, and to which he returns in seasons of repose; 2.  There can only be one residence; 3.  A residence cannot be lost until another is gained; 4.  The residence of the father during his life, and after his death the residence of the mother, while she remains unmarried, is the residence of the unmarried minor child; 5.  The residence of the husband is the residence of the wife; 6.  The residence of an unmarried minor who has a parent living cannot be changed by either his own act or that of his guardian; 7.  The residence can be changed only by the union of act and intent. ↩