Court Opinion

ID: 4480690
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:28.445711+00
Date Added: 2024-06-11T15:03:34.781246
License: Public Domain

Scott, J., dissenting: While the result reached by the majority in this case is equitable, I do not agree with the conclusion in the opinion that this case is distinguishable from Commissioner v. Mendel, 351 F. 2d 580 (C.A. 4, 1965), reversing 41 T.C. 32 (1963). The Court of Appeals in its opinion in that case stated that it had not been referred to nor found “any case which holds that unreimbursed moving expenses constitute any permissible deduction under the Revenue Code of 1954, or its predecessor statutes, where, as here, there is no finding that such moving expense is an ordinary and necessary business expense of the taxpayer,” and further stated that it was not aware of “any section of the Code making unreimbursed moving expense deductible where such expense is not an ordinary and necessary business expense of the taxpayer.” These statements were made following a statement that the taxpayer’s transfer “was initiated by a request of the Director of McGuire Veterans Administration Hospital, was made in the interest of the government, and was not requested by the taxpayer.” As I interpret the opinion of the Court of Appeals, it holds that the fact that a taxpayer makes a move in the interest of his employer and not at his own request does not cause the expense of the move to be an ordinary and necessary business expense. The fact that petitioner in the instant case was informed that unless he accepted the transfer to Lexington he would “jeopardize his future with the Kentucky Geological Survey” does not distinguish this case from Commissioner v. Mendel, supra. In Walter H. Mendel, 41 T.C. 32, 31 (1963), this Court called attention to the taxpayer’s having said in his opening statement at the trial that “it was necessary for him to accept the transfer in order to continue his employment with the Veterans Administration,” and to the respondent’s position that “even though petitioner’s retention of his employment with the Veterans Administration depended on his accepting the transfer * * * nevertheless the expenses of moving * * * were personal expenditures.” The Court of Appeals, however, in reversing our holding, did not comment specifically on the necessity of the taxpayer’s accepting the transfer to retain his employment. Had the Court intended its comments with respect to there being “no finding that such moving expense is an ordinary and necessary business expense of the taxpayer” to indicate that if the evidence showed that the taxpayer’s employment would be jeopardized if he refused the transfer, certainly some comment would have been made as to the taxpayer’s failure of proof in this respect. One of the cases relied on by respondent in support of his position in the Mendel case was H. Willis Nichols, Jr., 13 T.C. 916 (1949), which involved the disallowance of a claimed deduction for moving expenses by an army officer ordered to a change of station during time of war. The Nichols case is as near as any factual situation could come to an “involuntary” move. Normally in our society an employee does not make an “involuntary” move. He either refuses to move and accepts the consequences or he moves in the interest of his employer, generally with the hope that by complying with his employer’s interest he is also advancing his own interests. The fact that a taxpayer “protests” making the move, as petitioner did here, merely shows that his future advancement with his employer is more important to him personally than remaining in his old location. The move may be no more necessary to his employment advancement than such a move is to an employee who moves in the interest of his employer without protest or even happily. In the instant case there is no finding that petitioner was told or believed he would lose his position with his employer if he did not move, but even if such a finding were made, it would not in my opinion be the determining factor as to the deductibility of his moving expenses. It would show only that the move was made in preference to seeking a new employer. This petitioner was a professional man and moved because his employer requested him to move under such circumstances that he felt his best interests for continued success with that employer would be served by moving and he could expect no future advancement if he did not. He was evidently correct, at least in regard to his professional advancement being served by complying with his employer’s wishes, since he not only received a promotion upon making the move but subsequently was again promoted. However, the personal desire or lack of desire of a taxpayer to make a move in the interest of his employer does not, to me, seem material to determining whether the cost of moving his furniture and household effects is a business expense. It might be that where an employer required the employee to move his household effects, furniture, and family, such fact would be material, but there is no indication here of such a requirement. Petitioner could have sold his furniture as he did his house and rented furnished living quarters at the new location or bought new furniture. He could have maintained his personal home at his old location. See Commissioner v. Flowers, 326 U.S. 465 (1946). In fact he did not move his personal home until 5 months after his transfer. The choice of the petitioner to move his furniture and household effects was personal under the holding of a long line of cases prior to our decision in Mendel and in my opinion it was on the basis of this long line of cases that the Court of Appeals reversed our holding in Mendel. I am in sympathy with the result reached by the majority opinion and agree with petitioner’s position that the Commissioner’s Rev. Rul. 54-429, 1954-2 C.B. 53, is inequitable in that it permits an existing-employee who is reimbursed for Ins moving expenses to exclude tbe amount of tbe reimbursement from bis income even though courts have consistently held such reimbursements to constitute taxable income (see United States v. Woodall, 255 F. 2d 370 (C.A. 10, 1958)) but does not permit those existing employees who are required to move in the interest of their employers without reimbursement of moving expenses to deduct the cost of their moving expenses. Discrimination in the treatment of different taxpayers whose basic circumstances are the same is unappealing even if the discrimination is, as stated in Oonvmissioner v. Mendel, supra, “to alleviate the rigors of the statutory definition of gross income.” For years ending after December 31,1963, when moving expenses are paid after that date, the discrimination between the taxpayer who receives reimbursement and the one who does not has been removed by statute. Sec. 217, I.R.C. 1954. In H. Rept. No. 749, 88th Cong., 2d Sess., to accompany H.R. 8363 which included the provision which became section 217, I.R.C. 1954, 1964-1 C.B. (Part 2) 183, recognition of the existing inequity appears from the following statement: (b) General reasons for provisions. — Your committee believes that tbe existing tax treatment of moving expenses needs modification because tbe present treatment discriminates ‘against both new employees and employees who are not reimbursed for tbeir moving expenses by tbeir employers. Your committee sees no reason wby new employees should include in tbeir income amounts representing moving expenses which, if received by an existing employee who is moved by Ms employer from one location to another, would be excludable from income. Neither does your committee see any reason for discriminating against those employees who are not reimbursed for their moving expenses, but who incur such expenses in seeking job opportunities. Your committee believes that it is important to remove deterrents to the mobility of labor. Anything which can be done in this respect should aid in reducing local structural unemployment. In my opinion an even more inequitable situation for years to which section 217, I.R.C. 1954, is inapplicable will result if the criterion for determining the deductibility by an employee of unreimbursed moving expenses is to be, as suggested by the majority opinion in this case, the degree of pressure brought by the employer upon the employee to accept the transfer. In my opinion, a more desirable result would be to allow a deduction for reasonable moving expenses by any employee when the move is made in the interest of his employer. However, if this view is not to be adopted, such expenses should not be deductible by any employee who is not required by his employer to move his furniture and family, and reimbursements made of such expenses should be includable in an employee’s income. Tietjens, J., agrees with this dissent.