Court Opinion

ID: 4478544
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:13:08.732949+00
Date Added: 2024-06-11T14:53:32.988293
License: Public Domain

Foekester, J., dissenting: In view of the facts here involved I feel that the decision of the majority approaches a rule that every worker carries his statutory home on his back as he is moved from one work situs to another by his employer. All cases involving the allowance of “away from home” expenses involve essentially fact considerations. My only particular quarrel with the findings of the majority is with their ultimate findings; nevertheless, for better exposition of my position, I shall restate the facts. FINDINGS OF FACT. The stipulated facts are so found. Petitioners have been husband and wife at all times material. They filed a joint income tax return on the cash basis for the calendar year 1953 with, the director of internal revenue at Los Angeles, California. Irma P. Harvey is a party to this proceeding solely by virtue of the filing of a joint return, and John J. Harvey will hereinafter be referred to as the petitioner. The Douglas Aircraft Company, Inc. (hereinafter called Douglas), has manufacturing plants at Long Beach, El Segundo, and Santa Monica, all in the Los Angeles metropolitan area, and in 1953 it employed approximately 55,000 persons (there. A Testing Division, charged with the duty of flight testing all company products, has administrative headquarters and central offices in Santa Monica. In 1953 Douglas employed about 17,000 persons in its Santa Monica plant. Most of the personnel of the Testing Division who are assigned to flight testing projects are mechanics, electricians, and technicians, who are rarely if ever required to fly in the planes undergoing tests. In 1953 company policy was to centralize flight testing at Santa Monica. Test personnel were assigned from that office to various projects and duties. Tests were carried on at various locations both in and out of the Los Angeles area. High-speed jet aircraft began to appear significantly in the late 1940’s, with flight speeds in excess of the speed of sound at least as early as 1947. Thereafter, various technical, safety, and other considerations began to reduce the value of metropolitan centers such as the Los Angeles area as sites for flight testing, and created an increasing need for large, sparsely populated locations. In 1947 or earlier, Douglas began work on airplanes which were capable of speeds up to that of sound, and on aircraft which subsequently reached supersonic speeds. However, no Douglas plane exceeded sonic speed in actual flight, until the early 1950’s. Edwards Air Force Base (hereinafter called Edwards) is situated slightly in excess of 100 miles from Los Angeles. It is in a relatively dry area, and stands on the borders of a dry lake-bed approximately 5 miles wide by 12 miles long. It has good weather conditions for flight testing, a relatively unpopulated area, and suitable facilities for the performance of flight testing with maximum safety. Counterbalancing the foregoing were some undesirable features of Edwards. Its use took aircraft and test crews away from the main plant. This separation increased the overall complexity of testing operations, especially in coordination, communications, and the return of craft to the plant for additional work. On at least one occasion, during a strike at El Segundo, a plane scheduled for testing was trucked to Edwards ahead of schedule and there finished. This was quite exceptional, and in the one such instance of record much equipment which would normally have been installed at the factory was deleted. As a result, that particular plane commenced flight 4 months earlier than had been anticipated. The land and permanent facilities at Edwards were at all times owned by the United States. Douglas and the various other aircraft companies using those facilities did so solely at sufferance of the Government. As a matter of convenience and necessity, Douglas made substantial additions at its own expense to the facilities at Edwards. Any such addition, if a permanent part of the facility, became the property of the United States. In 1953 a runway 8,000 feet long and a number of test facilities were thus available to contractors, including Douglas, for flight testing. Prior to 1953 the runway had fallen into disrepair and a master plan was drafted, to be funded by the Government, calling for the enlargement and modernization of these facilities, including a new 15,000-foot runway. The plan called for the construction of the runway first, with provision for adequate facilities for the various contractors to be made only thereafter. The hangar facilities assigned to Douglas were then quite inadequate, and by late 1953 conditions were such that Douglas doubted its ability to continue to operate at Edwards. Douglas had long felt its assigned facilities at Edwards were inadequate and from 1950 forward had engaged in an extensive search for a better location. In 1954 an agreement was finally reached between Douglas, the Government, and another contractor to create a joint facility for both contractors convenient to the new runway. This was approved in the latter part of 1954, and Douglas moved into the facility early in 1956. In 1953 approximately one-fifth of all experimental and prototype craft assigned to the Testing Division was flight tested at Edwards. During the years 1950-1954, Douglas used the Los Angeles International Airport for the flight testing of jet aircraft to an extent approximately equivalent to that at Edwards. Some jet flight testing continued to be done at Los Angeles after 1954. The number of Douglas employees assigned to Edwards at any one time ranged between 120 and 140 in 1952, and between 134 and 167 in 1953. In 1953 approximately 900 employees in the Testing Division were engaged in flight-testing work similar to that at Edwards. Not until 1955 or 1956 was there a large upturn in the number of testing personnel of Douglas assigned to Edwards. During the early 1950’s and in 1953 Douglas did flight-testing work at the following locations in California: Los Angeles, Edwards, Point Mugu, El Centro, Saltón Sea, China Lake (Inyokem), and Palm Springs, and elsewhere, at Patuxent Eiver, Maryland, Holloman Air Force Base, New Mexico, and Tucson, Arizona. All testing personnel assigned to Edwards in 1953 received $7 per diem payments in addition to their regular salaries, on the ground that they were in. travel status while at Edwards. The propriety of such payments was reviewed by the appropriate military or other governmental authorities in connection with the establishing of proper costs on Government contracts, and the payments have never been disallowed. All field assignments of Testing Division personnel were by means of travel orders. All temporary travel orders were for 90 days or less, as a matter of company policy, because of the unpredictable duration of such assignments. The 90-day limit served as a control device for reviewing the feasibility of the assignment of a given employee and of continuing to maintain him in a temporary travel status. This method of assignment is used even where Douglas knows or is reasonably certain in advance that an individual will be at Edwards or some other location for a period in excess of 90 days. Travel in conjunction with a permanent assignment affords benefits unavailable to an employee on temporary assignment, including payment by Douglas of transportation and moving costs for the employee’s family and household goods, retransportation rights, and per diem payments, usually limited to 10 days, for the other members of the family as well as for the employee himself. Under the policy in effect at Douglas at all times pertinent hereto, an employee with the Testing Division was deemed to be at his “home” or permanent base when in the Los Angeles area, although Douglas was aware that some employees assigned to Edwards were purchasing homes in that area. Flight testing of Douglas planes was done on the project basis. An experienced test crew would be assigned to a plane in an early stage of its manufacture in order to become thoroughly familiar with it. This process of familiarization required at least 6 months, and the test crew would normally be assigned to the project 6 months to a year prior to the first flight. The same crew would thereafter remain with the plane wherever it might be sent on its testing program. In 1953 this might typically be to a remote area for initial flight testing, followed by a return to- the Los Angeles area for greater proximity to the manufacturing and engineering departments. The United States Navy has aircraft test facilities at Patuxent Liver, Maryland, El Centro, California, and China Lake at Inyo-kern, California. Final structural and aerodynamic testing of all planes ordered by the Navy took place at Patuxent. Testing at Pa-tuxent could require as little as 1 month or as much as 6 to 9 months. The same test crew originally assigned to the plane in Los Angeles would normally accompany it to Maryland for such testing. Willingness to travel away from the home plant was a condition precedent to employment in the Testing Division. In 1953 the Douglas planes undergoing flight testing at Edwards were principally military craft, and about 85 per cent of these were for tbe Navy. Military procurement normally begins with the setting up of a design requirement by the authority in question, seeking given performance objectives. Bids are then submitted and a contract is let. All activity is scheduled in advance, and an estimate made of the time required for each process and test, as well as the time of delivery to the customer. These estimates are confidential, and are not known to employees generally. Ordinarily, barring the unforeseen, a stay of 3 to 6 months would 'be the expectable length of a stay at Edwards for a given plane assigned there for flight testing. In actual practice, it is impossible to predict or anticipate all problems encountered in the testing of a plane of advanced design. Pow-erplant failures and structural changes, inter alia, are among the many causes which can and occasionally do lengthen the testing period of a particular craft substantially beyond any advance estimate, while other events, such as a crash, can and have at times, abruptly ended a test program long prior to its expected termination date. Individual Douglas planes have been at Edwards for periods of a few days to several years. Lancaster, California, is one of the nearest cities to Edwards. Its population at various times has been as follows: Year Population 1950_ 3,924 1953_10,530 1956_ 25,000 1958___ 29, 000 Aviation and agriculture are its principal economic bases. Its rapid growth since 1950 has been due in large measure to the expansion in that area of the aviation industry and activities at Edwards. The aircraft industry began to contribute to the growth of the area in 1946 or 1947. Shortly after final approval of the new, joint facility at Edwards, and in June 1955, Douglas changed its policy and its employees who could be expected to remain there were then permanently assigned. Such personnel were thereafter not deemed to be in travel status by Douglas except when absent from Edwards on temporary duty elsewhere. Petitioner was first employed by Douglas in 1940 as a radio technician. After working in various capacities, he was transferred in 1952 at his own request to the Testing Division at Santa Monica. Willingness to travel out of the Los Angeles area was essential to such transfer. On December 15, 1952, approximately 1 month after the transfer, he was assigned on 3 days’ notice as a technician to a project at Edwards in connection with an experimental jet plane designated the X-3. His j ob was to receive and record radio impulses from this airplane while it was in flight, known as telemetry. The X-3 was a purely researoh craft designed to investigate conditions of extreme high-speed and high-altitude flight. As a result of its extreme design and small whig area it had take-off and landing speeds of about 200 knots. These and other factors made each flight highly speculative and problematic. Petitioner remained at Edwards throughout 1953. The X-3 project effectively terminated late in 1953, and petitioner returned to the Santa Monica plant in January of 1954. From December 1952 until approximately October 1953, petitioner roomed first at a hotel and thereafter at two different private residences in Lancaster. His family continued to reside in Santa Monica during this period in a home which petitioner had purchased in 1942. Sometime in 1950 or 1951, petitioner and two related individuals had purchased 20 acres of land in Lancaster. Petitioner’s purpose was to acquire farming property for eventual retirement. Sometime in 1951 the purchasers began to develop the tract for chicken farming. They also hoped that the land would appreciate in value as a result of growth in the area, and thus turn their purchase into a successful speculative real estate investment as well. Petitioner had no idea of the eventual length of his stay at Edwards when first assigned there. After spending several months apart from his family, he decided to bring them to the area, and commenced construction of a dwelling on part of his land. His family moved into the new residence in the fall of 1953. Petitioner had a daughter of school age, and wanted to arrange the move so as to avoid a transfer in the middle of a school year. Thereafter, petitioner rented the Santa Monica house on a month-to-month basis. When he returned to the Santa Monica plant in 1954 his family remained in Lancaster. In 1954 petitioner was assigned to a matter designated the KB-66 seat-ejection project. His entire working time in 1954 was spent in the Los Angeles area with the exception of 67 days at Edwards, including the period in January prior to his release from the X-3 project, and 1 or 2 short trips to China Lake. Petitioner’s expenses for meals and lodging while at Edwards during 1953 are stipulated to have been $2,315. He deducted this amount on his return for that year as expenses while away from home. Kespond-ent has disallowed that deduction on the ground that for tax purposes petitioner’s “home” in 1953 was at Edwards. OPINION. The issue here is that of deductibility of certain expenditures as traveling expenses incurred while “away from home.” In Mort L. Bixler, 5 B.T.A. 1181, the then Board of Tax Appeals held that “home” for this purpose meant one’s principal post of business or employment, rather than one’s residence. We have consistently adhered to that view, and it has found support elsewhere. Barnhill v. Commissioner, 148 F. 2d 913 (C.A. 4); Harold R. Johnson, 17 T.C. 1261; Arnold P. Bark, 6 T.C. 851; Walter M. Priddy, 43 B.T.A. 18; Rev. Rul. 55-604, 1955-2 C.B. 49. Contra: Wallace v. Commissioner, 144 F. 2d 407 (C.A. 9), reversing a Memorandum Opinion of this Court. In Commissioner v. Flowers, 326 U.S. 465, an attorney residing in Jackson, Mississippi, accepted employment in Mobile, Alabania, but chose to retain his Jackson residence. In denying a deduction for expenses of travel between the two cities and for meals and lodging at Mobile, the Supreme Court laid down three prerequisites to such deduction as follows: 1. The expenditure must be a reasonable and necessary travel expense. 2. It must be incurred while “away from home.” 3. There must be a direct connection between the expense and the carrying on of the trade or business of the taxpayer or that of his employer. The Supreme Court found it unnecessary to define “home” as used in the statute, as it said the third requirement clearly had not been met, holding that the expenses in question were a result not of a trade or business but rather of the taxpayer’s personal desire to reside in J ackson. In the instant proceeding both parties appear to accept the view that “tax home” means principal post of duty. The sole issue is then whether in 1953 petitioner’s principal post of duty was at Edwards or in the Los Angeles area. This, in turn, depends upon whether his transfer to Edwards was temporary, or of sufficient permanence to shift his principal post of duty there, and away from the Los Angeles area where it had consistently been in the past. Both parties cite Peurifoy v. Commissioner, 358 U.S. 59. There a pipewelder, a welder, and a journeyman plumber undertook employment at a worksite distant from their respective residences. Their habitual method of obtaining employment was to report to the local union in the area where they lived. The union would then inform them of available work, and they would travel to its location at their own expense. They were never employees of the union and became employees of the contractors only when hired at the worksite. The three taxpayers in Peurifoy worked on the jobsite for periods of 20%, 12%, and 8% months, respectively. The latter two left for personal reasons and the record failed to disclose why the third left, nor did it appear whether further work was unavailable. The project in question appears, however, to have been one of substantial size and duration and to have continued. The Supreme Court held that under these facts each taxpayer had failed to show that his employment was “temporary” rather than “indefinite” or “indeterminate.” I think the instant case distinguishable. Petitioner did not go to Edwards to obtain employment; he was sent there by his employer of many years’ standing. He had a long-established and well-defined “tax home” in the Los Angeles area under any definition of that term, having both resided and worked there. I think the terms “temporary,” “indefinite,” and “indeterminate,” as well as “permanent,” must be defined within the context of the facts and circumstances of each case. An employment or assignment of a given duration may be temporary as to one taxpayer and indefinite or permanent as to another. Taking the instant case as an example, I do not think that an assignment to Edwards on what was virtually a single project which happened to last for approximately 1 year has the same significance in the light of this taxpayer’s history that it would have in the case of a taxpayer freshly arrived in the Los Angeles area who had never previously worked for Douglas, or who had no special skill and experience and thinkably could have been easily replaced by one hired locally. The length of a given assignment, while evidentiary, is not conclusive as to its nature. The initial understanding and expectation of the employer and employee is at least as weighty in that respect as what actually transpired. Compare Ney v. United States, 171 F. 2d 449 (C.A. 8), certiorari denied 336 U.S. 967; James R. Whitaker, 24 T.C. 750; Michael J. Carroll, 20 T.C. 382; Henry C. Warren, 13 T.C. 205, with Coburn v. Commissioner, 138 F. 2d 763 (C.A. 2), and Chester D. Griesemer, 10 B.T.A. 386. See also Donald H. Nelson, 30 T.C. 1151. Petitioner here had specialized skills and was a longtime career employee of Douglas. He became an employee of the Testing Division with headquarters at Santa Monica, California. He was then sent to, and worked on, a specific project at Edwards, where Douglas had no permanent facilities and where no personnel of petitioner’s skills and experience were then assigned other than in connection with such projects. The length of his stay at Edwards was “indefinite” or “indeterminate” only in the sense that its exact duration could not be predicted. Nonetheless, I believe it was temporary when examined within the context of petitioner’s relationship with Douglas. Respondent unduly emphasizes petitioner’s establishment of a family residence in Lancaster in the fall of 1953. As noted, respondent as well as this Court and most other tribunals which have examined the issue, have rejected the theory that one’s family residence is the statutory point of departure for the purposes of the deduction of traveling expenses “away from home.” This is true even when a taxpayer who in fact accepts a permanent assignment at a new location merely retains a long-established residence in the vicinity of his previous principal post of duty. I think the converse is equally true, and where all the facts show a change of one’s post of duty to be temporary, as they do here, the taxpayer’s act of changing his family residence to the new work situs cannot alone change such temporary assignment into one that is permanent or indefinite. While I look upon the location of the family residence as very strong evidence of the location of taxpayer’s “home,” as that word is used in the statute, I do not believe that this one factor is always decisive in every case. It may create a presumption, but that presumption is rebuttable. If it were not rebuttable it would be a rule of law, and the authorities and even the Commissioner’s own current rulings are otherwise. Section 23,(a) (1) (A) allows deduction of expenses for meals and lodging “while away from home.” The meaning of the word “home,” as thus used, has been the chief question considered in most of the cases decided under this statute and the great weight of authority is that “home” means principal post of business or employment, rather than residence. The Supreme Court has twice declined to decide this question, in Commissioner v. Flowers, supra, and Peurifoy v. Commissioner, supra, although in Flowers it effectively made such decision by holding that the maintenance by petitioner of his residence at Jackson was for personal, rather than business reasons. Since the situs of the family residence does not control when (a) taxpayer’s principal post of employment is elsewhere why should it control when (b) taxpayer’s principal post of employment is still elsewhere but taxpayer has a temporary post of duty at the same location as his residence? In other words, can we say that in the (a) situation “home” means “business home,” but that in the (b) situation it has changed and means “family residence” for that part of the time taxpayer is at his temporary post ? The very statement of such a Jekyll-Hyde approach demonstrates that it is unsound. The fact that such a rule wo.uld always work against taxpayer and always benefit the Commissioner is further evidence that it is not fair. Of course, the location of taxpayer’s residence is strong evidence of taxpayer’s principal post of employment because everyone is inclined to move to such place. But that evidence can be overcome by stronger evidence, and I think was so overcome by the facts in this case. The point is that we are entitled to consider it, i.e., that location of the family residence at Lancaster after October 1953 is not all that we are allowed to consider. This is no novel doctrine. Two recent Kevenue rulings directly concern it, as follows: 1. Rev. Rul. 54-141, 1954-1 C.B. 51, in considering the case of professional baseball players, managers, etc., reads in part: It is the well established position of the Internal Revenue Service that the terra “home” as nsed in section 23 (a) (1) (A) of the Code means the taxpayer’s principal place of business, post of duty, or place of employment. * * * [Therefore] * * * baseball players * * * are entitled to deduct their traveling expenses * * * when away from the “club town” * * * [[Image here]] In the case of professional baseball personnel who engage in * * * [an additional] business * * * [but] where the “club town” is the taxpayers’ principal place of business, such taxpayers are entitled to deduct their traveling expenses * * * while traveling away from their principal place of business, even though their permanent residence is located at the minor business post. In the latter case, only that portion of such expenses at his residence which is directly attributable to the taxpayer himself is a deductible expense * * *. [Emphasis added.] 2. Rev. Rul. 55-604,1955-2 G.B. 49, considers the case of an employee having two widely separated posts of duty and who maintains his family residence at his minor or temporary post of duty. It reads in part: It is now well established that a taxpayer’s “home” for traveling expense purposes is located at the place where he conducts his trade or business, unless he is so engaged at two or more distant localities, in which event his “home” is located at his principal or regular post of duty * * * [[Image here]] Accordingly, it is held that an employee having two widely separated posts of duty may deduct the cost of his meals and lodging while his work requires him to be at his minor or temporary post of duty, even though he maintains Ms family residence at that location. In such cases the deduction is limited, of course, to that portion of the family expenses for meals and lodging which is properly attributable to the taxpayer’s presence there in the actual performance of his duties. [Emphasis added. ] One facet of respondent’s objection to allowance of travel expense deductions to Harvey after be moved bis family to Lancaster in October 1953 is tbat Congress intended to allow a taxpayer to deduct only what bis business bad cost him — only “what be was out” — and tbat since he was living at bis family residence after October be was not “out” anything. The position taken in the Revenue Rulings is more realistic. They allow taxpayer only what be is “out,” but keep the definition of “home” as “business home” consistent and properly put the burden on taxpayer to prove “tbat portion of the family expenses for meals and lodging which is properly attributable to the taxpayer’s presence there.” In this case we are not concerned with this last question for the parties have stipulated the amount of petitioner’s expenses for meals and lodging while at Edwards during 1953. Certain facts, while not my sole criteria, do deserve special note. In 1958 it appeared that Douglas was about to discontinue tbe use of Edwards. This had left the stage of mere speculation, and Douglas was overtly taking steps to effectuate this purpose. Documents introduced into evidence justify the inference that in and around 1953 most assignments to Edwards of testing personnel were in fact for very short periods. And projects of the nature here involved were peculiarly unstable and could and did often end abruptly. Eespondent attacks as “unrealistic” the policy of Douglas of classifying as temporary petitioner’s assignment to Edwards. He insists that the sole reason Douglas failed to classify Edwards as a permanent location was the fact that it is a military post. But in 1955, despite its military nature, Edwards was so classified, since by then changes had been made and, it was in fact a permanent work situs for Douglas. I do not view as realistic respondent’s heavy reliance on hindsight. I am not unmindful that we have quite recently decided in respondent’s favor two cases involving aircraft employees sent to Edwards by other firms which have plants in the Los Angeles area. One such case is Darrell Spear Courtney, 32 T.C. 334, and the other an unreported Memorandum Opinion. The issue before us, however, is peculiarly one of fact, and should be resolved on that basis. Commissioner v. Flowers, supra; Peurifoy v. Commissioner, supra. Important factual distinctions between this case and the Courtney case include the following: 1. 'Courtney was a relatively new employee, without this taxpayer’s long history of service in the Los Angeles area for the same employer on whose behalf he went to Edwards. 2. Courtney expected to proceed permanently to Cape Canaveral from Edwards; he did. not expect ever to return to work in Los Angeles. 3. The record in the Courtney case shows a more significant establishment at Edwards on the part of North American Aviation, Inc., Courtney’s employer, including supervisory personnel and an office. 4. The recoi’d here affirmatively establishes serious inadequacy and imminent abandonment by Douglas of the use of Edwards in 1953; no such showing was made in the Cov/rtney case. 5. Courtney was an office employee not normally expected to change his work situs and thinkably could have been replaced by someone hired locally; whereas this petitioner, as a technical employee in the Testing Division, did in fact expect such changes frequently, with a return to work in the Los Angeles area after each project as well as during projects. 6. Courtney was assigned to Edwards generally, while petitioner was assigned to Santa Monica and was sent to, and worked, at Edwards in 1953 on one project. 7. Petitioner here fully expected to do a part of his work on this pro j ect at the home plant. The taxpayer in Oourtney appeared pro se, and it may be that some of the most weighty factual distinctions of record from the case at bar are due to his oversight or to the different degrees of skill with which the taxpayers in the two cases were represented. On the record in this case, our sole, proper criterion, I would find as a fact that petitioner’s principal post of duty in 1953 was in the Los Angeles area, and that he was at Edwards on a temporary assignment. He was therefore “away from home” within the meaning of sections 22(n) (2) and 23(a) (1) (A) of the Internal Revenue Code of 1939, and the determination of a deficiency should be held erroneous.