Court Opinion

ID: 4484065
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:29.44268+00
Date Added: 2024-06-11T08:49:14.519376
License: Public Domain

Wilbur, J., concurring: I concur in the majority opinion for the reasons expressed herein. The expenses of an automobile accident, whether attributable to damage to the car being driven or to physical harm inflicted on another person, are ordinary and necessary expenses of conducting a trade or business. It is certainly necessary to pay these expenses if one is to continue in business. And given the vicissitudes of travel by automobile, it is not extraordinary to have an accident. If an employee were involved in an accident under similar circumstances, the accident would be in the course of his employer’s trade or business, and the employer would be liable under the principles of respondeat superior. While the language of section 162 may vary from the standard governing an agency relationship, the everyday facts of life upon which this transaction is predicated are not sufficiently disparate to produce a different result. Given the findings of fact in the majority opinion, it is clear that the petitioner was traveling on business when the accident occurred and that this is the critical finding in allowing the deduction. Since he was traveling on business, petitioner would be allowed to depreciate his car, and if he had a blowout, the expenses of repairing his tire would be deductible. If the blowout caused him to hit a tree and damage his fender, the repairs would either be deductible, or the cost of repair would be depreciable over the remaining life of the car. Additionally, if the car was totaled, he woüld be entitled to write off his remaining basis in the car, and any new car acquired would be again subject to depreciation.1 While here, petitioner injured a child, the nature of the accident should not determine deductibility; rather (as the majority clearly holds), the definitive question is whether the accident occurred while petitioner was driving his car in his business. An accident may have varying consequences, but if it occurs on a business trip, the expenses of the accident are deductible. It is clear that insurance premiums to cover the loss of an accident — either collision insurance for damages to a vehicle or liability insurance covering injuries to third parties or their property — would be deductible to the extent that the car is used in a trade or business. Whether the costs of an accident are covered on a regular basis through insurance premiums, or the individual taxpayer is a self-insurer, should make no difference in this principle. Many policies have a deductible feature requiring the insured to pay the first $250 or $500 of the damages resulting from an accident. It makes no sense to allow a deduction for the premiums paid to cover the losses arising from an accident while disallowing the out-of-pocket costs paid to meet the deductible when an accident occurs. For this reason, the majority’s attempt to distinguish rather than overrule Freedman v. Commissioner, 35 T.C. 1179 (1961), affd. 301 F.2d 359 (5th Cir. 1962), is subtle and attenuated. The majority in the instant case emphasized that petitioner was traveling from a place of business to his home which was also his principal office and that “transportation costs of that trip are deductible,” citing Curphey v. Commissioner, 73 T.C. 766 (1980). In Freedman, the accident occurred when the petitioner was traveling directly from one business to another. We stated: Petitioner’s transportation between these two places of business may have been necessary in his business of earning an income from two sources, but the accident was merely incidental to that transportation and had nothing to do with either business activity which produced his income. * * * [35 T.C. at 1183.] In Freedman and in the case before us, the transportation costs were deductible because petitioner was, in making the trip, pursuing his business. Automobile accidents are part of the grist of modern life, a not atypical phenomena of traveling on business — and this is clearly the basis of the majority’s holding that the expenses before us are deductible. Since in both Freedman and this case, the petitioner was traveling on business, and the majority now holds that the expenses of the business trip (including an accident) are deductible, the cases are completely indistinguishable. I would therefore overrule Freedman in order to avoid the confusion that practitioners too often face when confronted with a series of cases involving metaphysical distinctions designed to preserve the illusion of continuity. As Mr. Justice Cardozo reminded us, we have an obligation to “gather up the driftwood and leave the waters pure.” See Hicks v. Commissioner, 47 T.C. 71, 74 (1966). Pure water is not the only benefit of frankly stating what we are doing; for the Service may use the driftwood to dispose of other cases, most of them involving taxpayers without counsel at the administrative level. A taxpayer with a case on all fours with the case we decide today, except he is traveling between two businesses, will surely be told by the Service that Freedman governs his case and that he loses. In many instances, the taxpayer will concede; even if he doesn’t, he may well have to litigate, and in order to overrule Freedman, the issue will once again be before the Court Conference. This is both unfair and expensive to the taxpayer and is very poor use of scarce judicial resources. For these reasons, I believe we should overrule Freedman. Fay, Dawson, Tannenwald, Sterrett, Hall, and Wiles, JJ., agree with this concurring opinion.  Assuming the vehicle was used partly for business reasons and partly for personal reasons, an allocation of these expenses would have to be made, but this does not change the principle.