Court Opinion

ID: 8958274
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:28:05.71006+00
Date Added: 2024-06-11T17:10:08.444664
License: Public Domain

McMILLIAN, Circuit Judge,
dissenting.
I respectfully dissent. I would reverse the judgment of the district court permitting taxpayers to deduct their expenses for meals. Taxpayers’ expenses for their own meals are personal in character and would be incurred by them whether or not the taxpayers were engaged in business activities. Section 262 of the Internal Revenue Code makes “personal, living, or family expenses” non-deductible, and a taxpayer generally may not deduct expenses incurred for his or her own meals unless the expenses are incurred for business travel away from home within the specific provisions for deductibility set forth in Code § 162(a)(2). This court in United States v. Morelan, 356 F.2d 199 (8th Cir.1966), holding that the mid-shift meal expenses of Minnesota state troopers were deductible as business expenses for travel away from home, was overruled by the Supreme Court in United States v. Correll, 389 U.S. 299, 88 S.Ct. 445, 19 L.Ed.2d 537 (1967). Viewing the holding of United States v. Correll, that such meal expenses could not be deducted under § 162(a)(2), to be inapplicable here and reasoning that the various conditions imposed by the patrol meant that taxpayers took their meals for their employers’ convenience, the district court held that the general provisions of § 162(a) authorize deductions of taxpayers’ meal expenses. This holding is incorrect.
Deductions are matters of legislative grace, existing by virtue of specific legislation, and a taxpayer claiming the benefits of a deduction must point to the applicable statutory authority and show that he or she comes within its terms. New Colonial *814Ice Company, Inc. v. Helvering, 292 U.S. 435, 440, 54 S.Ct. 788, 790, 78 L.Ed.2d 1348 (1934). The provision invoked by taxpayers in the district court is § 162(a) of the Internal Revenue- Code of 1954 (26 U.S.C. § 162(a)) that permits a deduction for the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.1 Section 162(a)(2) specifically includes within the meaning of ordinary and necessary business expenses the cost of traveling, including the entire amount expended for meals, while away from home in pursuit of a trade or business, but this section only applies where the taxpayer is away from home on a trip requiring him to stop for sleep or rest, and was not relied on by taxpayers at trial. United States v. Correll, 389 U.S. at 300, 88 S.Ct. at 446.
Section 262 of the Internal Revenue Code, however, prohibits any deduction for “personal, living, or family expenses,” unless expressly allowed by another provision of the Code.2 A taxpayer’s expenses for his or her own meals are personal in character because they would have been incurred whether or not the taxpayer had engaged in business activity. As a result, the courts have consistently held that the cost of restaurant meals or groceries purchased for consumption at work are not deductible. See, e.g., Moss v. Commissioner, 758 F.2d 211 (7th Cir.1985), cert. denied, 474 U.S. 979, 106 S.Ct. 382, 88 L.Ed. 2d 335 (1985); Alvarado v. Commissioner, 49 T.C.M. (CCH) 967 (1985), aff'd, 781 F.2d 901 (5th Cir.1986) (unpublished opinion); see also, United States v. Correll, 389 U.S. at 302 n. 7, 88 S.Ct. at 447 n. 7. Yet in this regard the district court’s holding in this case nevertheless, purports to find an exception to this well-established rule of non-deductibility for Minnesota state troopers.
The tax treatment of cash allowances and expenses for meals taken by troopers while on duty has received substantial attention by Congress and the courts. Section 119 of the Internal Revenue Code enacted in 1954, excluded from an employee’s gross income the value of employer-furnished meals if the meals were provided for the employer’s convenience, on its business premises, and for substantially non-compensatory reasons. 26 U.S.C. § 119 (1987). Congress, at the same time provided in § 120 of the Code, for an exclusion of up to $5.00 per day of statutory subsistence allowances paid to police officers. In 1958 this section was repealed because it was “inequitable since there are many other individual taxpayers whose duties also required them to incur subsistence expenditures regardless of the tax effect.” H.R. Rep. No. 775, 85th Cong., 1st Sess. at 7 (1958-3 C.B. 811, 817).
In United States v. Morelan, 356 F.2d at 202, involving substantially the same facts as presented here, this court held that the subsistence allowance received by Minnesota state highway patrolmen for meals was excludable from their income under § 119 of the Internal Revenue Code, and that even if such allowances were includable in gross income, the meal expenses would be deductible under § 162(a) as business travel expenses.3 In United States v. Correll, 389 U.S. at 301 n. 5, 88 S.Ct. at 446 n. 5, however, the Supreme Court ruled that traveling expenses incurred in the pursuit of business while away from home are deductible under § 162(a)(2) if, but only if, the travel requires the taxpayer to stop for rest or sleep, thereby overruling this court’s holding to the contrary in United States v. Morelan, 356 F.2d at 208-10. Several years later, in Commissioner v. *815Kowalski, 434 U.S. 77, 98 S.Ct. 315, 54 L.Ed.2d 252 (1977), the Supreme Court also overruled United States v. Morelan’s other holding concerning the excludability from income of the cash meal allowances paid to Minnesota state troopers. Commissioner v. Kowalski, 434 U.S. at 82 n. 11, 98 S.Ct. at 318 n. II.4 Thus, the Supreme Court determined that, contrary to United States v. Morelan, state troopers’ expenses for meals on duty were not deductible as business expenses under § 162(a)(2), and the cash allowance paid to state troopers for meals was not excludable from their income under § 119. Commissioner v. Kowalski, 434 U.S. at 77, 98 S.Ct. at 316.
Despite the clear import of United States v. Correll and Commissioner v. Kowalski in overruling the United States v. Morelan holding regarding the tax treatment of meal allowances and meal expenses of Minnesota state troopers, and the clear prohibition of § 262, the district court determined that the deduction of the meal expenses of these taxpayers was authorized under the general provisions of § 162(a). The district court apparently believed that United States v. Correll had no bearing on this case because taxpayers based their claims under the general provisions of § 162(a) rather than § 162(a)(2).5 But if the general provisions of § 162(a) were available to render job-related-meal expenses deductible, it is difficult to see why the Supreme Court in United States v. Correll needed to concern itself with whether they were traveling expenses under § 162(a)(2). Rather, in United States v. Correll the Supreme Court recognized that in general, a taxpayer’s meal expenses are personal and non-deductible under § 262, and that the court needed to concern itself only with the special benefits of § 162(a)(2), which (partly for the reasons of administrative convenience) gives the business traveler “something of a windfall, for at least part of what he spends on meals represents a personal living expense that other taxpayers must bear without receiving any deduction at all.” United States v. Correll, 389 U.S. at 301-02, 88 S.Ct. at 446-47. It is quite apparent that the district court entirely failed to take into account § 262 and, in this, clearly erred as a matter of law. Furthermore, it is well-established that a taxpayer’s expenses for daily meals consumed at work are personal, non-deductible expenses. The various conditions imposed on these taxpayers do not create an exception to the principle of non-deductibility by transforming the essential personal character of their meal expenses into business expenses allowable under the general provisions of § 162(a).
If taxpayers’ daily meals are to be considered business expenses, then they must meet the proper test. The proper test developed by the courts over the years is whether an expense is personal in character and would be incurred by the taxpayer whether or not he or she is engaged in the business activity. Stated another way, a personal expense is not rendered deductible by virtue of the fact that the taxpayer incurs the expense while at work. The cost of a taxpayer’s own meal, whether or not consumed while on duty, is clearly a personal expense. See, United States v. Correll, 389 U.S. at 301-02, 88 S.Ct. at 446-47; Fife v. Commissioner, 73 T.C. 621, 625 (1980); Sutter v. Commissioner, 21 T.C. 170, 173 (1953); § 1.262-l(b)(5), Treasury Regulations on Income Tax (1954 Code) (26 C.F.R. § 1.262-l(b) (1987)).
*816The courts have consistently held that the cost of restaurant meals or groceries purchased for consumption while at work is not deductible. See, e.g., Alvarado v. Commissioner, 49 T.C.M. (CCH) 967 (1985), aff'd, 781 F.2d 901 (5th Cir.1986) (unpublished opinion) (deduction denied for cost of meals consumed by firemen while on duty at fire house); Hammond v. Commissioner, 49 T.C.M. (CCH) 1562 (1985), aff'd, (4th Cir.1986) (unpublished opinion) (deduction denied for cost of meals purchased by Virginia state troopers).
So too, it is also well settled that the fact an expense would not have been incurred “but for” the taxpayer’s engaging in a trade or business is not sufficient to permit a deduction if the expense is personal or otherwise of a non-deductible nature. Kroll v. Commissioner, 49 T.C. 557, 567 (1968). The cost of commuting to and from work is a classic example of an expense which, although not incurred but for the fact that a taxpayer is working, is nevertheless personal and non-deductible. Fausner v. Commissioner, 413 U.S. 838, 93 5.Ct. 2820, 37 L.Ed.2d 996 (1973); Commissioner v. Flowers, 326 U.S. 465, 66 S.Ct. 250, 90 L.Ed. 203 (1946). Thus, it would seem that the courts have made clear that some types of expenses are so inherently personal they do not qualify as ordinary and necessary business expenses, regardless of the role they play in the taxpayer’s trade or business. Neither is the fact that the expenses in question herein were required to be incurred as a condition of employment alone sufficient to render such personal expenses deductible.6
It is apparent that the expenses which the district court found to be ordinary and necessary expenses of taxpayers’ business as employees were instead ordinary and necessary expenses of their daily sustenance. The cost of these meals, daily, represents a substantial portion of the cost of the taxpayers’ daily subsistence. The holding of the district court, and now joined in by the majority, thus permits these taxpayers to deduct substantial amounts of their ordinary living costs. Such a result clearly is not permitted by the ^express provisions of § 262 of the Internal Revenue Code.
The district court here did not, in its discussion of the deductibility of taxpayers’ meal expenses, take § 262 into account. The court was legally obligated to apply § 262, however, and in disregarding this provision of the Internal Revenue Code, plainly erred. In addition, the court never made the proper analysis to determine whether an expense is personal or business. It failed, as the majority does now, to recognize that meal expenses are personal and would be incurred whether or not a taxpayer engaged in business activity. Hence, its decision is incorrect.
The district court, now joined by the majority, was persuaded that taxpayers “were subject to duty-related restrictions and requirements concerning their meals while on duty” and that these “restrictions effectively extended the performance of their duties from patrol cars on highways to tables in restaurants.” The “restrictions” found by the court to require deductibility were that troopers were required to eat their meals “exclusively” in roadside public restaurants and were subject to interruptions “from members of the public and emergency calls.” From this the court concluded that taxpayers took their mid-shift meals for the convenience and the benefit of the highway patrol rather than for the taxpayers’ own convenience and comfort.
The district court’s conclusion that taxpayers took their meals on duty for the employer’s convenience and benefit is plainly wrong. The court did not find, nor is there any evidence to indicate that the taxpayers were required to purchase meals as a condition of their employment as troopers.7 Moreover, the court failed to consid*817er that taxpayers decided what restaurants to patronize, what food to order, how much to spend, and, indeed, whether to eat at all. It is clear, however, that their “ ‘decision to eat or not to eat and the amount expended thereon was wholly a matter of personal choice,’ ” and the expenses incurred in making those choices are non-deductible under § 262 of the Internal Revenue Code. Alvarado v. Commissioner, 49 T.C.M. (CCH) 967 (1985), citing Banks v. Commissioner, 42 T.C.M. (CCH) 1016, 1019 (1981).
Can it be that the restrictions placed by the patrol upon state troopers’ meals are sufficient to transform taxpayers’ personal expenses for their daily meals into business expenses? I think not. For instance, although troopers were required to eat at their scheduled times “unless the call of duty demands otherwise,” and were allowed “no less than one half an hour or more than one hour during each normal workshift,” schedules and time limits for lunch are common to many, if not for most employees whose employer attempts to make fair and efficient use of their personnel. Troopers were required to eat their meals on duty “in a public restaurant adjacent to the highway,” but many taxpayers must eat their meals during working hours in restaurants, and such a necessity does not change the essentially personal nature of their meal expenses. See, e.g., Moss v. Commissioner, 758 F.2d 211 (7th Cir.1985), cert. denied, 474 U.S. 979, 106 S.Ct. 382, 88 L.Ed.2d 335 (1985); Moscini v. Commissioner, 36 T.C.M. (CCH) 1002 (1977). Finally, troopers were required to inform the patrol where they would be eating and were subject to interruptions by members of the public and emergency calls. Yet many other taxpayers keep “beepers” or are on duty during the meals they take during working hours.
In this regard, taxpayers here are no different from other taxpayers who have to work during lunch. The courts have repeatedly held that business-related restrictions or conditions imposed on the manner in which a taxpayer takes his meals while at work do not change the expenses for those meals into deductible business expenses. See, e.g., Walsh v. Commissioner, 52 T.C.M. (CCH) 1344 (1987) (a pharmacist); Moffit v. Commissioner, 31 T.C.M. (CCH) 910 (1972); Liang v. Commissioner, 34 T.C.M. (CCH) 1298 (1975); Kammerer v. Commissioner, 35 T.C.M. (CCH) 30 (1976) (medical students). As the tax court stated in Moss v. Commissioner, 80 T.C. 1073, 1080 (1983), aff'd, 758 F.2d 211 (7th Cir.1985), cert. denied, 474 U.S. 979, 106 S.Ct. 382, 88 L.Ed.2d 335 (1985), concerning business-related conditions affecting taxpayers’ lunches, the taxpayer—
Ha[d] not explained ... how this ‘restriction’ is any different than that imposed on an attorney who must spend his lunch hour boning up on the rules of civil procedure in preparation for trial or reading an evidence book to clarify a point that may arise during an afternoon session. In all of these cases, the lawyer spends an extra hour at work. The mere fact that this time is given over the noon hour does not convert the cost of daily meal into a business expense to be shared by the government.
Furthermore, the happenstance that the patrol may have derived incidental benefits, from the troopers’ public visibility and their accessibility during meals taken while on duty, does not operate to exclude taxpayers’ meal expenses from personal or living expenses under § 262. Congress has determined that all taxpayers shall bear their living cost without receiving a deduction unless one has been specifically authorized. Cf. Fausner v. Commissioner, 413 U.S. at 839, 93 S.Ct. at 2821. The convenience and benefit to an employer gained from imposing conditions on where and how employees take their meal does not affect the tax status of the meal except under the provisions of § 119 of the Internal Revenue Code. Hence, the district court improperly reasoned that the convenience to the patrol permitted taxpayers to deduct their daily *818meal expenses.8
Uniformly, the decisions of the courts emphasize that unless a taxpayer can demonstrate that the meal expense is different in character or in amount from what he ordinarily would undertake, the expense remains a personal non-deductible expense. Here, there is no indication that taxpayers incurred expenses that they would not have had ordinarily or expenses that were extraordinary in amount. Thus, even if a business purpose for taxpayers’ meal expenses could be found, the district court, as is the majority, was incorrect in permitting taxpayers to deduct their meal expenses because taxpayers never established that the amount of expenses for their meals while on duty differed from or exceeded amounts they would have spent for their own personal purposes.
For the reasons given herein, this decision cannot and should not be permitted to stand. Therefore, in my opinion it should be reversed and judgment entered for the appellee.

. In this regard, an employee, such as each taxpayer here was, is considered to be engaged in "the business of earning his pay.” Noland v. Commissioner, 269 F.2d 108, 111 (4th Cir.1959), cert. denied, 361 U.S. 885, 80 S.Ct. 156, 4 L.Ed.2d 121 (1959).

. The deduction allowance provision contained in § 262 takes precedence over the deduction allowance provision of § 162(a), to the extent that there is any conflict. See Commissioner v. Idaho Power Co., 418 U.S. 1, 17, 94 S.Ct. 2757, 41 L.Ed.2d 535, (1974); Sharon v. Commissioner, 66 T.C. 515, 522-23 (1976), aff'd, 591 F.2d 1273 (9th Cir.1978), cert. denied, 442 U.S. 941, 99 S.Ct. 2883, 61 L.Ed.2d 311 (1979).

.Karl Christey, one of the taxpayers here, was also one of the taxpayers in United States v. Morelan, 356 F.2d 199 (8th Cir.1966).

. Congress mitigated the effect of Commissioner v. Kowalski by providing in effect that the decision would be applied to police officers only prospectively and expanded that relief by removing the bars of res judicata, the statute of limitations, and other rules of laws, in order to permit police officers and state highway patrolmen to claim refunds and credits for meal allowances during taxable years 1974 through 1977. Act of October 7, 1978, Pub.L. No. 95-427, 92 Stat. 996, § 3; Miscellaneous Revenue Act of 1980, Pub.L. No. 96-605, 94 Stat. 3521, 3524 § 107.

. It should be noted that in his dissent in Commissioner v. Kowalski, 434 U.S. at 96-98, 98 S.Ct. at 326-27, Justice Blackmun expressed his view that, as a result of the decision, combined with the decision of the Supreme Court in United States v. Correll, state troopers were being deprived unfairly of the tax benefits permitted to them under this court’s decision in United States v. Morelan. Justice Blackmun did not indicate that § 162(a) would provide an alternative basis for deductibility.

. Here, however, there was no indication that taxpayers were required to purchase meals as a condition of their employment.

. Although in two cases Sibla v. Commissioner, 68 T.C. 422 (1977), and Cooper v. Commissioner, 67 T.C. 870 (1978), aff'd, sub nom. Sibla v. Commissioner, 611 F.2d 1260 (9th Cir.1980)— the tax court permitted a business deduction under Code § 162(a) for a mandatory contribution to a firefighter’s communal mess, whether *817or not he ate, as a condition of employment. Those cases involved very limited circumstances not present here. In any event, the Commissioner of Internal Revenue stated his nonac-quiescence in those decisions. See, 1978-1 C.B. 2, 3.

. The court's rationale in this regard appears to use a standard borrowed from cases determining whether the value of meals and lodging could be excluded from income. This “convenience of the employer" test for excludability from income as the Supreme Court made clear in Commissioner v. Kowalski, 434 U.S. at 90-96, 98 S.Ct. at 322-26, did not survive the enactment of § 119 as an independent test; thus proof that the meals were provided as a business necessity was insufficient to permit excludability from income unless the other test of § 119 was also satisfied.