*119 Decision will be entered for the respondent.
Petitioner, a foreign service officer with the Department of State, was ordered to return to the United States for consultation with the Department in Washington, D.C., after which he was placed on "home leave" which was granted pursuant to the Foreign Service Act of 1946, as amended, 22 U.S.C. sec. 1148. The dominant motive and purpose of the Department in ordering petitioner on "home leave" and of the petitioner in taking it was to provide petitioner with a vacation. Held: Petitioner's alleged traveling expenses incurred while he was on "home leave" are not deductible as traveling expenses while away from home "in the pursuit of a trade or business," within the meaning of sec. 162(a)(2), I.R.C. 1954. Rudolph v. United States, 291 F. 2d 841, certiorari dismissed 370 U.S. 269">370 U.S. 269 (1962).
*379 The Commissioner determined deficiencies in the income tax of petitioners as follows:
| Taxable year | Deficiency |
| 1962 | $ 561.72 |
| 1963 | 415.00 |
The only issue presented for our determination is whether petitioner Bruce Cornwall Stratton, a foreign service officer with the State Department, may deduct as an ordinary and necessary expense incurred in his trade or business certain expenditures for food, lodging, and transportation for himself and his family while he was in the United States on "home leave" from his foreign service.
FINDINGS OF *121 FACT
Some of the facts have been stipulated and are so found. The stipulation and the exhibits attached thereto are incorporated herein by this reference.
Petitioners Bruce C. Stratton and Louise B. Stratton, husband and wife, filed joint Federal income tax returns for the taxable years 1962 and 1963. The 1962 return was filed with the director of international operations, Washington, D.C. The 1963 return was filed with the district director of internal revenue, Baltimore, Md. Petitioners' legal residence was Honolulu, Hawaii, at the time they filed their petition herein.
Petitioner Bruce C. Stratton (hereinafter referred to as petitioner) was employed in 1950 and continued to be employed by the State Department as a foreign service staff officer during the years in question. During this employment, petitioner has lived in various foreign cities to which he has been assigned. His household goods, car, and a major portion of his personal effects have remained outside of the United States although petitioner has returned to the United States on several occasions, usually for visits of 45-90 days duration.
In May 1961, petitioner was assigned to Karachi, Pakistan. On September *122 5, 1962, the State Department issued petitioner a document entitled "Authorization of Official Travel," the pertinent provisions of which provided as follows:
You are hereby authorized to perform official travel at Government expense as indicated herein. This travel is not ordered at your request nor for your convenience, except for leave as allowed by law. You are to proceed in accordance with instructions contained herein or as amended. Unless otherwise noted, all expenses and the maximum per diem under the regulations checked below are authorized. * * *
* * * *
Leave at Government expense -- from Karachi, Pakistan to Washington, D.C., for consultation in the Department for a period of approximately three (3) *380 workdays; to Denver, Colorado to avail yourself of leave; and from Denver. Colorado, return to Karachi, Pakistan.
Loose pack and segregate effects for eventual nominal shipment.
Dependents: Louise, wife; Bruce, b. 2/9/53; James, b. 6/19/54; Christopher, b. 4/14/56; Mary, b. 1/4/58 - Karachi/Denver/Karachi.
Do not travel prior to September 13, 1962.
The petitioner, his wife and children, left Karachi on September 14, 1962. They traveled to Rome, Italy, where they*123 stayed until October 4, 1962, when they departed for the United States. Petitioner arrived in Washington, D.C., on October 10. On October 15, 1962, petitioner was placed on home leave.
The State Department has set forth regulations pertaining to home leave which are set forth in the "Department of State Foreign Service Manual" and in the "Department of State Foreign Affairs Manual." Among the provisions of the "Department of State Foreign Service Manual" pertaining to home leave, which were in effect during the period in question, are the following:
450 LEAVE FOR USE IN THE UNITED STATES
451 Policy
Within the limitation of available funds, the Department authorizes leave in the United States, its Territories or possessions with travel at Government expense after two years of continuous service abroad or as soon thereafter as practicable. This policy is applicable to home leave * * * and to annual leave in certain cases. * * * As a general rule, 45 workdays of leave, exclusive of transit time, are approved, with not less than 30 workdays of leave to be taken in the continental United States, its Territories or possessions. Exceptions to the 30-day requirement may be made by*124 the Department based on the needs of the Service.
* * * *
453 Home Leave
453.1 Definition
Home leave means leave of absence without regard to annual or sick leave granted to Foreign Service officers * * * for use in the United States, its Territories or possessions, at a rate equivalent to 5 workdays of home leave for each full 4 months of service outside the continental United States. * * *
* * * *
453.3 Granting
453.31 Home Leave At Government Expense
The Department may grant home leave, or combined home and annual leave, with travel at Government expense to any employee, provided that he has completed 2 years of continuous service abroad. * * *
* * * *
453.4 Restrictions
453.41 Home leave, as distinguished from annual leave, may be used only in the United States, its Territories or possessions. Any leave used en route outside the United States, its Territories or possessions, is not chargeable to home leave.
*381 453.42 An employee will not be granted home leave in excess of the amount to his credit on the date of his departure from the post on home leave. However, current accrued and accumulated annual leave may be granted in combination with home leave in order*125 to provide an adequate period of leave in the United States, its Territories or possessions. * * *
453.43 Home leave will be granted when it is planned that the employee will return to and complete a tour of duty abroad, either immediately or upon completion of an assignment in the United States. An employee who resigns during home leave shall be indebted to the United States for an amount equivalent to the salary payments made for the period charged to home leave.
453.44 Unused home leave shall not be the basis of any terminal leave or lump-sum payment.
The Foreign Service Manual contains detailed instructions governing the computation of the amount of home leave by an employee. Among the provisions of the "Department of State Foreign Affairs Manual," as revised August 8, 1962, pertaining to home leave are the following:
453 Home Leave
453.1 General
453.1-1 Authority
The following authorities govern home leave:
a. Section 203(f) of the Annual and Sick Leave Act of 1951, as amended, provides that employees may be granted leave of absence at a rate not to exceed one week for each 4 months of continuous service outside the United States without regard to any other leave provided*126 by the Leave Act, for use in the United States, or, if their respective places of residence are outside the area of employment, in the Commonwealth of Puerto Rico or the possessions of the United States.
b. Employees are ordered to the continental United States, its Territories and possessions on home leave, with travel at Government expense, under authority of section 933(a) of the Foreign Service Act of 1946, as amended, which permits the Secretary to order an American employee on home leave after 18 months of continuous service abroad, and makes it compulsory that such employee be so ordered on home leave as soon as possible after completion of 3 years of such service.
* * * *
453.4-2 Home Leave Prior to Washington Assignment
If an employee's next assignment is in the Department and he is eligible for and requests home leave, every effort will be made to authorize leave to be taken prior to his entrance on duty in the position to which assigned or in one continuous period within 6 months following the date he reports for duty.
* * * *
455 Quarterly Report of Employees Eligible for Home Leave
455.1 Time of Submission
Each post shall submit quarterly * * * a report of employees*127 eligible for home leave, either by meeting time eligibility requirements or by having had home leave deferred to the quarter for which the report is submitted. * * *
455.2 Instructions for Preparation of Report
455.2-1 Explanation of Columnar Headings
* * * *
*382 f. Recommendation
Recommendations shall be submitted as follows:
(1) A recommendation for "return" or "transfer" need not be supported if the recommendation is in accordance with the tour of duty policy * * * and if the employee plans to depart shortly after attaining eligibility for home leave.
(2) If the recommendation for "return" or "transfer" is qualified by a request for deferral of home leave for personal or post reasons, the reasons for the deferral shall be justified and the proposed departure date, by month and year, shall be included.
(3) If the recommendation for "return" or "transfer" does not conform with * * * [the tour of duty policy] the recommendation shall be justified.
455.2-2 Justification
In justifying a recommendation for the deferral of home leave or for the transfer of senior officers after only 2 years at post, specific and considered reasons shall be given. Unspecified "personal reasons" *128 or "post needs" are not considered sufficiently compelling for the Department to consider requests for exceptions to established policy. On the other hand, if circumstances do require exceptions, the Department wants to know about them to avoid detrimental application of general policy to specific cases. In justifying a recommendation for a return to post on the part of a junior officer, specific plans for broadening his experience through rotation within the post shall be included. If known, the mode of travel to be used by the employee shall be reported in all cases at the end of the justification statement.
The petitioner remained on leave from October 15, 1962, to either January 15, 1963, or February 15, 1963. He was on home leave for a portion of this time and on annual leave for the remainder. He was free to travel where he chose and do as he pleased; he was not subject to control by his employer. He could not, however, charge to home leave any time spent outside the United States. The petitioner was unable to recall specifically what he did during this period except that he visited his wife's relatives and traveled with his wife, spending part of the time in the East*129 and part of the time in the West.
The petitioner claimed deductions for the unreimbursed expenses allegedly incurred for transportation, food, and lodging while he was on home leave. The claimed deductions -- $ 3,040 in 1962 and $ 2,250 in 1963 -- have not been substantiated by any records. The Commissioner determined deficiencies for these years reflecting his disallowance of the claimed expenses as deductions.
OPINION
Home leave is granted pursuant to the Foreign Service Act of 1946, as amended, 22 U.S.C. sec. 1148. Section 1148(a) of that Act provides:
The Secretary may order to the continental United States, its Territories and possessions, on statutory leave of absence any officer or employee of the Service who is a citizen of the United States upon completion of eighteen months' continuous service abroad and shall so order as soon as possible after completion of three years of such service.
*383 Petitioner maintains the expenses he incurred for food, lodging, and transportation for himself, his wife, and his four children while he was on home leave constitute ordinary and necessary expenses incurred in the pursuit of his trade or business*130 as a foreign service officer. Section 162(a)(2), I.R.C. 1954, 1 provides a deduction for traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business. We assume that the traveling expenses were incurred while petitioner was "away from home," which he claims was Karachi, Pakistan. The expenses do not seem lavish or extravagant in amount, recognizing they provided food, lodging, and transportation for a family of six for 3 or 4 months. The issue in this case focuses upon the requirement of section 162(a)(2) that the traveling expenses be incurred "in the pursuit of a trade or business." The petitioner contends that his trip to the United States and his travel within the United States while he was on home leave constitute a business trip, and that the expenses incurred during his travel within the United States were directly and proximately related to his business of living and working abroad for the U.S. Government. He maintains that under the Foreign Service Act and the regulations of the Department of State, a foreign service officer *131 is "ordered" on home leave, that he must go when he is so ordered and that he must go to the United States, and he must remain in the United States for a certain period of time. While his family is not compelled to accompany him, petitioner maintains this is the intent of the assignment as members of his family appear on the original order and funds are provided for their transportation to the United States. Accordingly, it is maintained, petitioner was required to duplicate his living expenses and those of his family by maintaining his home in Karachi while he was required at the same time to pay all their travel expenses, including food and lodging, after they had arrived in the United States.
We do not think these alleged expenses were incurred by petitioner in the pursuit of his trade or business as a foreign service officer. Whatever were the circumstances surrounding petitioner's travel to this country, the record*132 does not establish that petitioner's home leave was not granted primarily for his personal convenience. The "Authorization of Official Travel" authorizes official travel at Government expense to Denver, Colo., in order that petitioner might avail himself of leave at that place. Presumably, Denver was specified by petitioner as the place to which he would like to have transportation provided *384 for himself and his family. The "Authorization" itself bears witness to the personal nature of home leave in its provisions: "This travel is not ordered at your request nor for your convenience, except for leave as allowed by law." (Emphasis supplied.)
In light of the regulations pertaining to home leave, we interpret this sentence to mean that home leave is granted at the employee's request and for his personal convenience. While deferral of home leave appears to constitute an exception to the established policy of the Department of State, the regulations clearly contemplate that such an exception may be made for personal reasons so as to "avoid detrimental application of general policy to specific cases." Foreign Affairs Manual sec. 455.2-2. It is only "Unspecified 'personal*133 reasons' or 'post needs'" which are not considered sufficiently compelling for the Department to consider requests for exceptions to this policy. Specified personal reasons would appear to be sufficient for deferral of home leave. The purpose behind the requirement that personal reasons be specified appears to be merely to inform the Department of what those reasons are rather than to demonstrate any particular detriment to the employee. We find it difficult to believe that petitioner's financial inability or even his unwillingness to assume the burdensome expense of supporting his family in public accommodations in this country would not be considered "sufficiently compelling for the Department to consider [his request for deferral of home leave]," within the meaning of the Foreign Affairs Manual sec. 455.2-2. There is no evidence that petitioner's home leave in fact was under any compulsion. The personal nature of petitioner's travel expenses is further indicated by the fact that such expenses are not reimbursed by the Department of State. Nor are foreign service officers granted a per diem allowance while they are on home leave.
The regulations pertaining to home leave*134 indicate the clearly personal nature of home leave. The employee "earns" home leave, which is "credited" to his "leave account" as earned, just as annual leave or vacation time would be earned by an employee and credited to his account. Section 453.42 of the Foreign Service Manual provides that an employee will not be granted home leave in excess of the amount to his credit. That section also provides that accrued annual leave may be granted in combination with home leave in order to provide an adequate period of leave in the United States. We read this to mean that, because home leave will not be granted for periods of less than 30 days (presumably because of the expense of transporting foreign service employees to the United States), an employee who has accrued less than 30 days of home leave may combine accrued home leave with accrued annual leave in order to reach the 30-day minimum. These regulations set forth detailed provisions for computing home *385 leave earned by an employee. The strict controls on the accrual of home leave, and the restriction against use of home leave in excess of the amount accrued further suggest that such leave is primarily for the personal*135 benefit of the employee.
It is clear that home leave is not solely for the personal benefit of the employee. The legislative history of the Foreign Service Act of 1946 discloses that one purpose of home leave is to insure that every foreign service officer returns to the United States approximately every 2 years in order to renew touch with the American way of life and thereby become a better representative of this country abroad. Another purpose is to give such employee an opportunity to attend to certain personal matters such as medical and dental checkups and the purchase of new wardrobes. H. Rept. No. 2508, 79th Cong., 2d Sess., pp. 138, 139 (1946). These incidental benefits to the employee's career do not change the essential nature of the leave from personal to business. Many personal expenses are related, or even necessary, to the carrying on of a business and yet are not deductible.
Petitioner's argument is similar to that advanced by the taxpayer in Rudolph v. United States, 291 F. 2d 841, certiorari dismissed 370 U.S. 269">370 U.S. 269 (1962). Rudolph presented the question of deductibility of expenses incurred by *136 an insurance salesman, whose tax home was in Dallas, Tex., during his attendance with his wife at a convention in New York City. By having sold a predetermined amount of insurance, the husband qualified to attend the convention and, in line with company policy, to bring his wife with him. With 150 other employees and officers of the insurance company and 141 wives, they traveled to and from New York City on special trains, and were housed in a single hotel during their 2 1/2-day visit. One morning was devoted to a "business meeting" and group luncheon, the rest of the time in New York City to "travel, sight-seeing, entertainment, fellowship or free time." The entire trip lasted 1 week. The company paid all the expenses of the convention trip. The Commissioner determined the payment of these expenses constituted taxable income and that the husband was not entitled to deduct the expenses as ordinary and necessary business expenses. There was evidence that the trip furthered the interests of the insurance company. It was not undertaken exclusively for the personal benefit of the employees and their wives. The convention kept the group together in New York City, and in transit *137 as well, giving ample time for group discussions, exchanges of experience, and educational training. There was evidence that insurance companies benefit from the knowledge and increase in morale which result from these conventions. There was evidence, too, that business reasons of the company motivated the inclusion of wives in this particular convention. There was some evidence that the husband regarded *386 the trip as "required" by his business -- that he was an entrapped "organization man," required to attend such conventions, and that his future promotions depended on his presence. The tax consequences of the trip, it was decided, turned upon the taxpayer's "dominant motive and purpose" in taking the trip and the company's in offering it. The District Court found the trip was provided by the company for the primary purpose of affording a pleasure trip in the nature of a bonus, reward, and compensation for a job well done and that from the point of view of the taxpayer it "was primarily a pleasure trip in the nature of a vacation," Rudolph v. United States, 189 F. Supp. 2">189 F. Supp. 2, 4-5. (Emphasis supplied.) On these findings the claimed expenses*138 were held to constitute taxable income for which the taxpayer was not allowed any offsetting deduction.
We think the petitioner's case falls at least within the rationale of the Rudolph case. There is no evidence of compulsion in this case. The primary purpose of the Department of State in granting petitioner home leave appears to be, and we find it to be, to give petitioner a vacation. From the petitioner's point of view, his home leave was primarily a pleasure trip in the nature of a vacation. In these circumstances, the claimed expense deductions cannot be allowed.
Decision will be entered for the respondent.
Footnotes
1. All statutory references are to the Internal Revenue Code of 1954 unless otherwise specified.↩