T.C. Memo. 2010-12
UNITED STATES TAX COURT
JAMES M. AND JERI L. MINICK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6517-07. Filed January 21, 2010.
James M. and Jeri L. Minick, pro se.
Michael T. Sargent, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARIS, Judge: Respondent determined an income tax
deficiency of $3,628 for petitioners’ 2004 tax year.
After concessions, the parties dispute the following: (1)
Whether petitioner James M. Minick (Mr. Minick) was “away from
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home” within the meaning of section 162(a)(2)1 for business
purposes during the taxable year 2004; (2) if Mr. Minick was away
from home within the meaning of section 162(a)(2), whether he
sought reimbursement for claimed unreimbursed employee business
expenses for the taxable year 2004; and (3) whether Mr. Minick
and Jeri L. Minick (Mrs. Minick) are entitled to an itemized
deduction for unreimbursed employee business expenses for the
taxable year 2004.2 As explained below, this Court holds that
petitioners cannot deduct their claimed travel expenses, because
Mr. Minick was not “away from home” within the meaning of section
162(a)(2) and petitioners’ expenses were not ordinary and
necessary business expenses. This determination makes any
remaining issues moot.
FINDINGS OF FACT
The parties’ stipulation of facts and the attached exhibits
are incorporated herein by this reference, and the facts
stipulated are so found. During the taxable year 2004 Mr. and
Mrs. Minick (petitioners) maintained a personal residence in
Eure, Gates County, North Carolina. Petitioners resided in Eure
at the time their petition was filed.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and Rule references are to
the Tax Court Rules of Practice and Procedure.
2
This issue is considered prior to the application of the 2
percent of gross income limitation imposed by sec. 67(a).
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Mr. Minick failed to appear at trial. Mrs. Minick testified
on behalf of petitioners. Petitioners married in 2002. In Eure
Mrs. Minick worked at a shipyard for 24 years before her marriage
to Mr. Minick. She raised her children from a prior marriage
there on a property with a mobile home (the Eure residence). She
has been making mortgage payments on the Eure residence for 23
years. She expressed an emotional attachment to the Eure
residence and believes that she would never sell it.
Petitioners married when Mrs. Minick was “between jobs”.
Neither of the Minicks had employment in Eure during the tax year
at issue. Petitioners often traveled to Virginia so that Mrs.
Minick could stay with and care for her sick mother. Petitioners
considered Virginia their home State in 2004. Petitioners
maintained Virginia driver’s licenses, and their cars were
registered and titled in that State. Petitioners had to travel
outside the Eure area to find work. Mrs. Minick estimated that
approximately 85 percent of Gates County residents received
welfare benefits because that county’s impoverished economy could
not offer any employment opportunities. During 2004 Mrs. Minick
spent an undisclosed amount of time traveling between Virginia,
Eure, and Mr. Minick’s assigned jobsites. Mrs. Minick was not
employed during that same year, and only after that tax year did
Mrs. Minick work at the same construction site as Mr. Minick.
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Throughout 2004 Pizzagalli Construction (Pizzagalli) hired
Mr. Minick as a field engineer and considered him an hourly
employee. Pizzagalli was in South Burlington, Vermont, but Mr.
Minick worked elsewhere. He worked where hospitals or water
treatment plants were being built. At each jobsite he surveyed
the land at the beginning of the construction process. The
Minicks did not live in or near the area where Pizzagalli was
located at anytime during the tax year 2004.
From January 2004 to July 2004 Mr. Minick was assigned to a
jobsite in Taylors, South Carolina. From July 2004 to December
2004 Mr. Minick worked at an assigned jobsite in Flowery Branch,
Georgia. Pizzagalli expected its hourly employees to live in
motels while finding an apartment or other housing to rent near
an assigned jobsite. When not traveling between Virginia and
Eure, Mrs. Minick accompanied Mr. Minick to the assigned
jobsites, where they resided in a camper. Petitioners had
purchased that camper to travel between the jobsites. The cost
of maintaining the camper was less than renting an apartment or
other housing. Petitioners did not use the camper for camping.
Mrs. Minick did not accompany Mr. Minick when he lived in motels.
In September and November 2004 Mr. Minick stayed at Lake Lanier
Lodges.
During 2004 petitioners maintained the Eure residence. They
made mortgage payments and paid utilities expenses. No one lived
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in the Eure residence when petitioners were not there.
Petitioners considered Mr. Minick’s assigned jobsites to be
temporary and intended to return to Eure when possible.
Petitioners timely filed a joint return for the taxable year
2004. The return indicated that petitioners’ home address was a
post office box in Harpers Ferry, West Virginia. Petitioners
claimed deductions for unreimbursed employee expenses related to
Mr. Minick’s employment with Pizzagalli.3 Petitioners claimed
deductions for “MOTELS” expenses of $2,341 and “LIVING EXPENSES”
of $13,075 before respondent had conceded certain expenses,
including business mileage, phone expenses, safety equipment,
tools, and other miscellaneous expenses. Petitioners’ “LIVING
EXPENSES” included mortgage payments on the camper, camper
parking lot rent payments, insurance on the camper, gas, tolls,
and repairs and maintenance on the camper. Those “LIVING
EXPENSES” also included insurance on the Eure residence,
utilities payments for the Eure residence, life insurance,
medical insurance, and DirecTV cable bills. Petitioners
purchased an insurance policy on Mr. Minick’s life from Chase
3
Petitioners claimed an itemized deduction for unreimbursed
employee business expenses of $18,983 for the taxable year 2004.
At the start of the trial respondent conceded that petitioners
are entitled to a $4,602 deduction for these expenses, consisting
of the following: (I) Safety equipment in the amount of $600;
(ii) a depreciation and sec. 179 expense deduction for small
tools in the amount of $250; (iii) phone maintenance in the
amount of $2,627; and (iv) vehicle expenses of $1,125, consisting
of 3,000 miles at the applicable standard mileage rate.
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Insurance Life Co., an insurance policy on Mrs. Minick’s life
from Zurich Life Insurance Co. of America, and an insurance
policy that would cover Mrs. Minick’s medical expenses from NNS
Group Insurance.
OPINION
For the expenses remaining in dispute, the parties have
raised the following issues: (1) Whether Mr. Minick was “away
from home” within the meaning of section 162(a)(2) for business
purposes during the taxable year 2004; (2) if Mr. Minick was away
from home within the meaning of section 162(a)(2), whether he
sought reimbursement for unreimbursed employee business expenses
for the taxable year 2004; and (3) whether petitioners are
entitled to an itemized deduction for unreimbursed employee
business expenses for the taxable year 2004. As explained below,
this Court holds that petitioners cannot deduct their claimed
travel expenses, because Mr. Minick was not “away from home”
within the meaning of section 162(a)(2) and petitioners’ expenses
were not ordinary and necessary business expenses. This
determination makes the remaining issues moot.
Deductions are a matter of legislative grace, and taxpayers
bear the burden of proving their entitlement to a deduction.
Rule 142(a)(1); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Petitioners argue that their claimed unreimbursed
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employee business expenses are deductible because they were
incurred while Mr. Minick was traveling away from home for
business purposes.
Section 262 provides that a taxpayer generally cannot deduct
personal, living, or family expenses. However, section 162(a)(2)
allows taxpayers to deduct travel expenses paid or incurred while
away from home in the pursuit of a trade or business. Travel
expenses include travel fares, meals, lodging, and other expenses
incident to travel. Sec. 1.162-2, Income Tax Regs. The
deduction for “away from home” travel expenses alleviates the
burden of duplicate living expenses incurred by a taxpayer whose
business needs require him to maintain two places of abode.
Kroll v. Commissioner, 49 T.C. 557, 562 (1968).
In order to claim a travel expense deduction, a taxpayer
must show that his expenses are ordinary and necessary, that he
was away from home when he incurred the expense, and that the
expense was incurred in pursuit of a trade or business.
Commissioner v. Flowers, 326 U.S. 465, 470 (1946). Whether a
particular expense fulfills these three conditions is generally a
question of fact. Id. All three conditions must be satisfied to
claim the deduction. See id. at 472. Petitioners have failed to
demonstrate that Mr. Minick was away from home within the meaning
of section 162 and that their expenses were ordinary and
necessary business expenses.
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Under section 162, the term “‘home’ does not have its usual
and ordinary meaning.” Henderson v. Commissioner, 143 F.3d 497,
499 (9th Cir. 1998) (quotation marks omitted), affg. T.C. Memo.
1995-559. This Court has interpreted a taxpayer’s “home” under
section 162 to mean his principal place of employment and not
where his personal residence is located. Mitchell v.
Commissioner, 74 T.C. 578, 581 (1980). The Court must consider
the “away from home” requirement “in light of the further
requirement that the expense be the result of business
exigencies”. Hantzis v. Commissioner, 638 F.2d 248, 253 (1st
Cir. 1981), revg. T.C. Memo. 1979-299. Where a taxpayer’s
principal place of employment is other than his residence and he
chooses not to move his residence for personal reasons, his
additional living and travel expenses are a result of that
personal choice. Such personal expenditures cannot be deemed
ordinary and necessary business expenses. Commissioner v.
Flowers, supra at 473-474; Tucker v. Commissioner, 55 T.C. 783,
786 (1971).
An exception to the general rule does exist. A taxpayer may
claim his personal residence as his home in situations where the
taxpayer is away from his home on a temporary, rather than
indefinite or permanent basis. Peurifoy v. Commissioner, 358
U.S. 59, 60 (1958); Kroll v. Commissioner, supra. If a taxpayer
cannot show that he had both a permanent and temporary abode for
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business purposes during the year at issue, he is not entitled to
the deduction. See Kroll v. Commissioner, supra; Farran v.
Commissioner, T.C. Memo. 2007-151; Bauer v. Commissioner, T.C.
Memo. 1973-111; see also Rosenspan v. United States, 438 F.2d
905, 912 (2d Cir. 1971) (holding that traveling salesman had no
permanent place of abode); James v. United States, 308 F.2d 204,
207 (9th Cir. 1962); Hicks v. Commissioner, 47 T.C. 71, 74
(1966); Deneke v. Commissioner, 42 T.C. 981, 983 (1964); Verner
v. Commissioner, 39 T.C. 749, 755-756 (1963) (holding that
engineer maintained no abode in area from which he was
transferred). The Court may consider a taxpayer’s subjective
intent as to the length of time he may wish to remain in a
particular position, but it is not a controlling factor in
determining whether that position is temporary or indefinite.
See, e.g., Henderson v. Commissioner, supra at 500.
In arguing that their “home” was their Eure residence and
that Mr. Minick was temporarily away from that home while working
at the assigned jobsites, petitioners rely on the exception to
the general rule. The Court disagrees with petitioners’
inaccurate application of the law.
The Court need not decide whether Mr. Minick’s work at the
assigned jobsites was “temporary” or “indefinite” if Mr. Minick
had no “tax home” pursuant to section 162. See, e.g., Hantzis v.
Commissioner, supra at 255; Stewart v. Commissioner, 77-2 USTC
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par. 9617 (10th Cir. 1972), affg. T.C. Memo. 1971-307. An
individual may be considered as an itinerant for purposes of
section 162 if that individual has neither a principal place of
business nor a place he resides permanently. Deamer v.
Commissioner, 752 F.2d 337, 339 (8th Cir. 1985), affg. T.C. Memo.
1984-63; Edwards v. Commissioner, T.C. Memo. 1987-396; see also
Hantzis v. Commissioner, supra at 253 (finding that “where a
taxpayer is constantly on the move due to his work, he is never
‘away’ from home”). The Court considers all the facts and
circumstances of a particular case to determine the existence of
an individual’s tax home. Henderson v. Commissioner, supra at
500. Courts have examined the following objective factors set
forth in Rev. Rul. 73-529, 1973-2 C.B. 37,4 with respect to this
determination: (1) Whether there exists a business connection to
the location of the alleged tax home; (2) whether duplicate
living expenses are incurred while traveling and while
maintaining the alleged tax home; and (3) whether personal
connections exist to the alleged tax home. See Henderson v.
Commissioner, supra at 500. For the following reasons, the Court
4
While revenue rulings do not have force of law, they are
instructive because they represent the interpretations of the
agency responsible for enforcing the tax laws. See Henderson v.
Commissioner, 143 F.3d 497, 500 n.2 (9th Cir. 1998), affg. T.C.
Memo. 1995-559; see also Merchs. Indus. Bank v. Commissioner, 475
F.2d 1063, 1064 (10th Cir. 1973), affg. T.C. Memo. 1972-18.
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holds that Eure was not Mr. Minick’s tax home and that he was an
itinerant for the tax year 2004.
First, Mr. Minick had no business reason for his tax home
to be in Eure. Petitioners contend that Mr. Minick traveled to
the assigned jobsites because no employment opportunities existed
in the Eure area. During the year at issue Mr. Minick spent
approximately 6 months at each of the two assigned jobsites.
During 2004 Mr. Minick did not return to Eure at any time for
business purposes. Moreover, petitioners gave no indication of
any foreseeable ability or intention to return to Eure for
business purposes. Petitioners had no business reason for
maintaining their Eure residence.
Courts may regard a taxpayer’s decision to keep his family
at his previously established residence as motivated by personal
reasons unrelated to his trade or business where a taxpayer has
no business ties to the area of that residence and when the
prospects for employment in his chosen profession are better away
from the area than in it. Tucker v. Commissioner, supra at 787;
see also Hantzis v. Commissioner, 638 F.2d at 255. This is so
even though his job in another place lasts for less than a year.
See, e.g., Tucker v. Commissioner, supra. Under some
circumstances, a job duration of 6 months may be short enough to
merit a finding that it would be unreasonable to expect the
taxpayer to move his family. However, this Court cannot reach
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such a conclusion here, where Mr. Minick has no business
relationship with the Eure area for tax home purposes.
Mrs. Minick also had no business ties to the Eure residence
on account of her unemployment during the year in issue.
However, this fact is not dispositive, since the deduction
claimed is not for her business activities. In cases involving
spouses with careers in different locations, “Each must
independently satisfy the requirement that deductions taken for
travel expenses incurred in the pursuit of a trade or business
arise while he or she is away from home.” Hantzis v.
Commissioner, supra at 254 n.11.
Second, petitioners failed to show that their living
expenses incurred in the maintenance of the Eure residence had
the requisite business connection. In 2004 petitioners made
mortgage and utilities payments for the Eure residence. However,
Mrs. Minick testified that petitioners’ “home” was Virginia
during that time and that petitioners’ driver’s licenses, as we1l
as the registration and title to their car, were issued by the
State of Virginia. Mrs. Minick accompanied Mr. Minick at his
assigned jobsites, where they resided in a camper5 purchased for
the purpose of traveling between the jobsites. Mrs. Minick
5
The Court notes that petitioners had already received
deductions for their use of the camper. At the commencement of
the trial respondent conceded vehicle expenses of $1,125 for
3,000 miles at the applicable standard mileage rate.
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appears to have spent a negligible amount of time at the Eure
residence, and Mr. Minick seemingly did not return to Eure at all
during the year in issue. In any event, any duplicate living
expenses are attributable to petitioners’ personal choice and are
not dictated by the exigencies or demands of Mr. Minick’s
business.
In the light of petitioners’ failure to establish the
existence of any business relationship with the Eure area, the
Court finds neither that the Eure residence was Mr. Minick’s tax
home nor that he incurred the expenses in question while away
from home within the meaning of section 162(a)(2).
For the tax year 2004 petitioners deducted “MOTELS” expenses
and “LIVING EXPENSES” relating to the purchase and maintenance of
their camper. As discussed previously, Mr. Minick for the tax
year 2004 was not away from home within the meaning of section
162. The local motels and the camper allowed Mr. Minick to
maintain his peripatetic lifestyle. Mr. Minick’s motel expenses
and the cost of purchasing and using the camper were not dictated
by the exigencies of his engineering trade. The Court concludes
that these motel and camper expenses are all personal expenses
that cannot be deducted under section 162.
Likewise, the Court concludes petitioners’ expenses incurred
in the maintenance of the Eure residence are not deductible under
section 162(a). Petitioners deducted other “LIVING EXPENSES”
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consisting of insurance premiums and utility bills for the tax
year 2004. These expenses arose out of Mrs. Minick’s choice to
maintain her personal residence, and, therefore, Mr. Minick did
not incur these expenses in the carrying on of his trade. Any
expenses related to “The cost of insuring a dwelling owned and
occupied by the taxpayer as a personal residence [are] not
deductible.” Sec. 1.262-1(b), Income Tax Regs. Furthermore, any
“Expenses of maintaining a household, including amounts paid for
rent, water, utilities * * * and the like, are not deductible.”
Id. Thus, the insurance payments and utilities expenses incurred
for the maintenance of Mrs. Minick’s Eure residence were personal
expenses and not deductible as Mr. Minick’s ordinary and
necessary business expenses.
The Court further finds that their personal insurance
premiums are not deductible as business expenses. Petitioners
deducted their life insurance and medical premiums for the tax
year 2004. The payments for Mrs. Minick’s life and medical
insurance are not ordinary and necessary business expenses
because these expenses were not incurred in the furtherance of
Mr. Minick’s engineering trade or any other business conducted by
him or Mrs. Minick. Nor does the record demonstrate that
petitioners’ payments of Mr. Minick’s life insurance premiums are
ordinary and necessary business expenses. Additionally,
“Insuring against the costs of maintaining [petitioners’] health
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is primarily a personal concern, not merely a business concern.”
Green v. Commissioner, 74 T.C. 1229, 1236 (1980). Therefore,
petitioners’ payments of life and medical insurance premiums are
not deductible under section 162.
Last, petitioners deducted the cost of their DirecTV service
as a business expense. Payments for television and cable bills
are not deductible business expenses if they were not directly
related to a taxpayer’s business. See, e.g., Judisch v. United
States, 755 F.2d 823, 826 (11th Cir. 1985); Stemkowski v.
Commissioner, 690 F.2d 40, 48 (2d Cir. 1982), affg. in part and
revg. in part 76 T.C. 252 (1981). Petitioners failed to prove
how their cable service assisted Mr. Minick with his engineering
duties. Hence, the Court infers their DirecTV payments afforded
them nothing more than personal entertainment. Accordingly,
petitioners’ DirecTV payments were personal expenses and not
deductible as ordinary and necessary business expenses.
Conclusion
Petitioners have failed to prove that Mr. Minick incurred
ordinary and necessary business expenses while traveling away
from home in the pursuit of business for the tax year 2004. The
Court therefore denies petitioners’ claim to business expense
deductions under section 162 for the expenses in dispute.
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To reflect the foregoing and respondent’s concessions,
Decision will be entered
under Rule 155.