UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 93-4969
RICHARD J. PUTNAM and
DORETHA G. PUTNAM,
Plaintiff-Appellee,
VERSUS
UNITED STATES OF AMERICA,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of Louisiana
(September 9, 1994)
Before REYNALDO G. GARZA, DeMOSS and PARKER,1 Circuit Judges.
DeMOSS, Circuit Judge:
Retired federal judge Richard J. Putnam and his wife
Dorethea2 brought this tax refund suit under I.R.C. § 6532(a)(1)
after the IRS disallowed their claim for refund of $2,781.00 and
1
When this case was argued, the Honorable Robert M. Parker,
Chief Judge of the Eastern District of Texas, was sitting by
designation. Judge Parker has since been confirmed as a member
of this Court.
2
The record refers incorrectly to Mrs. Putnam as Doretha; we
correct this error in the text of the opinion.
$1,320.40 in federal income taxes, plus interest, for the years
1985 and 1986, respectively. The case raises novel tax issues
concerning the deductibility of travel and subsistence expenses
incurred by a retired federal judge while traveling between his
"official duty station," statutorily defined to be the place
where he maintains his residence, and the nearby courthouse to
which he has been assigned.
BACKGROUND
Judge Richard J. Putnam was appointed as a federal district
judge for the Western District of Louisiana in 1961. At that
time and up to the present, Judge Putnam and his wife Dorethea
have resided in Abbeville, Louisiana. Until his retirement in
1975, Judge Putnam held court in Lafayette, some 20 miles from
his home in Abbeville. Upon his retirement, Judge Putnam's place
of residence, or Abbeville, became his official duty station
pursuant to 28 U.S.C. § 374.
During 1985 and 1986, Judge Putnam was recalled to serve in
the Western, Eastern, and Middle Districts of Louisiana.3 During
this period, Judge Putnam's primary point of service was
Lafayette, where he was provided chambers in the federal
courthouse. While serving there, Judge Putnam incurred
automobile expenses occasioned by his commute from Abbeville to
Lafayette.4 He also incurred subsistence expenses for mid-day
3
This assignment was made on a year to year basis pursuant
to 28 U.S.C. §§ 292(b) and 294(c).
4
These expenses included gasoline, oil, repairs, insurance
and depreciation.
2
meals taken in Lafayette. He was reimbursed, in part, for both
types of expense by the Administrative Office of the United
States ("AO"), pursuant to 28 U.S.C. § 456(a).5
On their 1985 and 1986 joint tax returns, the Putnams
excluded the AO reimbursements for meals from their gross income
and took a deduction for the automobile expenses that were in
excess of the AO reimbursements received.6 After an audit, the
IRS included all AO reimbursements in the Putnam's taxable income
and disallowed the business deductions, reasoning that because
Judge Putnam's "tax home" was the federal courthouse in
Lafayette, he was not traveling "away from home" as required by
I.R.C. § 162(a)(2), the traveling expense deduction provision.
Therefore, the IRS concluded, the automobile and meal expenses
were non-deductible personal commuting and living expenses,
rather than deductible business expenses. Accordingly, the IRS
assessed additional tax, plus interest, for the years 1985 and
1986, which the Putnams paid.
5
The AO reimbursed Judge Putnam for his automobile expenses
on a per mile basis and the reimbursements received were less
than the actual expenses incurred. For meal expenses, however, AO
reimbursements equaled Judge Putnam's actual meal expenditures.
6
On his 1985 return, Judge Putnam reported employee business
expenses of $7,900, subtracted employer reimbursements of $2,796,
and claimed a net deduction of $5,104. On his 1986 return, he
reported employee business expenses of $4,655, subtracted
employer reimbursements of $3,218, and claimed a deduction in the
amount of $1,437.
Judge Putnam's decision to exclude the $1,392 in AO
reimbursements for meals taken in Lafayette was based on treasury
regulation 26 C.F.R. § 1.162-17(b), which excuses reporting of
certain otherwise deductible business expenses when the employee
is required to account to the employer for such expenses and the
expenses equal the reimbursements received from the employer.
3
Thereafter, the Putnams filed a formal claim for refund. In
the refund claim they again offset their actual automobile
expense against the automobile reimbursements and claimed a
deduction for the excess expense. The Putnams also sought to
exclude from their taxable income the AO reimbursements received.
After the IRS disallowed their claim, the Putnams filed this
suit.
Both parties stipulated to the relevant facts and filed
cross-motions for summary judgment, waiving oral argument on the
motions. The District Court entered summary judgment for the
Putnams, holding that I.R.C. § 162(a)(2) entitled Judge Putnam to
deduct for both the expenses of commuting between his residence
in Abbeville and the federal courthouse in Lafayette and the cost
of his mid-day meals while in Lafayette. Putnam v. United
States, 826 F. Supp. 988 (W.D. La. 1993). Accordingly, the
District Court awarded the Putnams a refund of $5,509.42 in
income tax and assessed interest paid for 1985 and 1986, together
with statutory interest on this amount. The United States
appeals this judgment.
After reviewing the district court's judgement de novo, we
find that Judge Putnam's transportation and meal expenses were
personal commuting expenses, which are not deductible as business
expenses under I.R.C. § 162. The parties to this case have
stipulated to the relevant facts necessary to this appeal and
this Court can reach the remaining issues as a matter of law. We
reverse the district court's summary judgment in favor of the
4
Putnams and order entry of summary judgment in favor of the
Government. The plaintiffs will take nothing on their refund
claim based upon Judge Putnam's personal commuting expenses.
DISCUSSION
This case presents the Court with an opportunity to explore
the relationship, if any, between 28 U.S.C. §§ 374 and 456, which
entitle federal judges to reimbursement for travel expenses, and
I.R.C. § 162, which establishes when business expenses may be
deducted from a taxpayer's reported gross income. Title 28
U.S.C. §456(a) authorizes the Director of the AO to reimburse
federal judges for transportation and subsistence expenses
incurred while transacting official business away from the
judge's official duty station. The "official duty station" of a
justice or judge is designated by statute and is used to
determine when a judge is entitled to reimbursement for traveling
expenses. Section 456(f) states that the official duty station
of a retired judge is determined by 28 U.S.C. § 374. Section 374
states, in relevant part:
Retired judges of the United States are
not subject to restrictions as to residence.
The place where a retired judge maintains the
actual abode in which he customarily lives
shall be deemed to be his official station
for purposes of section 456 of this title.
Prior to his retirement in 1975, Judge Putnam was not
entitled to reimbursement for automobile or meal expense
5
occasioned by his commute to Lafayette.7 Once he was recalled
from retirement, the AO interpreted section 374 as entitling
Judge Putnam to reimbursement for the expenses he incurred in
making the same commute to Lafayette. The Government does not
contend that Judge Putnam should not have been reimbursed for his
expenses and the propriety of the reimbursement is not at issue
in this case. Rather, the question presented here is whether, by
providing that retired judges would be reimbursed for travel from
the place where they maintain their residence, Congress intended
to extend an automatic tax deduction for those expenses under the
traveling expense deduction provision I.R.C. 2 § 162.
The Government contends that Judge Putnam may not take
business deductions for the expenses occasioned by his travel
between his home in Abbeville and his chambers in Lafayette,
because those expenditures are essentially personal "commuting"
expenses, which are not deductible. The Putnams and amicus
respond by arguing, in effect, that the "no tax deduction for
mere commuting" rule is inapplicable to retired federal judges
who are recalled to service, because the tax law contravenes the
policy underlying enactment of the judicial reimbursement
provisions in 28 U.S.C. § 374 and 456, which is to provide
incentives to federal judges to return to service.
7
The official duty station of a district court judge is that
place where regular court sessions are held and the judge
performs a substantial part of his work which is nearest the
judge's residence. 28 U.S.C. § 456(d). Prior to his retirement,
Judge Putnam's official duty station was Lafayette. Therefore, he
was not entitled to reimbursement for expenses associated with
his travel there each day.
6
I.
THE ORDINARY TAXPAYER AND
BUSINESS EXPENSE DEDUCTIONS
UNDER I.R.C. § 162
It seems clear that if Judge Putnam is subject to the same tax
laws as any other citizen, his transportation and meal expenses are
not deductible. Traveling expenses are not deductible unless they
meet three conditions: (1) the expense must be reasonable and
necessary; (2) the expense must be incurred while "away from home";
and (3) the expense must be incurred "in pursuit of business."
Commissioner v. Flowers, 326 U.S. 465, 470 (1946). Failure to
satisfy even one of the three conditions destroys the traveling
expense deduction. Flowers, 326 U.S. at 472. Whether Judge
Putnam's expenses were reasonable or necessary has not been
disputed. Instead, the controversy centers around whether his
expenditures were incurred while "away from home" and "in pursuit
of business" as required by I.R.C. § 162(a)(2). We conclude that
they were not.
A. The requirement that travel expenses be incurred "away from
home."
A taxpayer's "home" for purposes of business deductions under
26 U.S.C. § 162 is that place where he performs his most important
functions or spends most of his working time. Commissioner v.
Soliman, 113 S. Ct. 701, 706 (1993). Our Court has repeatedly held
"that the term "home" for purposes of § 162 means the vicinity of
the taxpayer's principal place of business and not where his
personal residence is located. Michel v. Commissioner, 629 F.2d
1071, 1073 (5th Cir. 1980); Curtis v. Commissioner, 449 F.2d 225,
7
227 (5th Cir. 1971); Jones v. Commissioner, 444 F.2d 508, 509 (5th
Cir. 1971); see also Flowers, 326 U.S. at 474 ("[b]usiness trips
are to be identified in relation to business demands and the
traveler's business headquarters"). Thus, for purposes of I.R.C.
§ 162, "home" does not have its usual and ordinary meaning. In
fact, "home" -- in the usual case -- means "work."
The parties stipulated that Judge Putnam did not maintain an
office in Abbeville, although he did occasionally perform some
research in a law library there. During his recalled service, he
was provided chambers and held court on a daily basis in Lafayette.
The 20 mile commute did not impose on him the necessity of taking
lodgings for sleep or rest before returning from Lafayette each
evening. See United States v. Correll, 389 U.S. 299, 302-03 (1967)
("the Commissioner has consistently construed travel 'away from
home' to exclude all trips requiring neither sleep or rest....[b]y
so interpreting the statutory phrase, the Commissioner has achieved
not only ease and certainty of application but also substantial
fairness").
The courts have recognized two exceptions to the general rule
that a taxpayer's home is determined with reference to his
principal place of business. However, neither exception is
applicable here. For example, "if the taxpayer chooses to maintain
his residence at a place far removed from his place of business,
the travel expenses are not `ordinary and necessary' since [they
are] not dictated by business needs. On the other hand, if the
taxpayer cannot reasonably maintain his residence at his place of
8
business, the travel expenses are `ordinary and necessary' and
hence deductible." Commissioner v. Stidger, 386 U.S. 287, 298
(1967). This principle was applied prior to the Stidger decision
by this Court in United States v. LeBlanc, 278 F.2d 571 (5th Cir.
1960), a case in which the facts, are at first glance, deceptively
similar to the present case. LeBlanc allowed a Louisiana Supreme
Court Justice, who was required to work in New Orleans for
approximately nine months of every year, to deduct from gross
income as travel expenses the cost of an apartment in New Orleans
which was occupied by the Judge and his wife when he was in
attendance on the Supreme Court. In that case, it was a condition
of Judge LeBlanc's position as an Associate Justice that he also
maintain a permanent residence in the geographic district from
which he was elected. LeBlanc, 278 F.2d at 575 (the Louisiana
Constitution required justices moving from their election district
to vacate office). At the same time, "the exigencies of business"
required that Judge LeBlanc be present in New Orleans to hold
court. Because Louisiana required that he maintain two "homes,"
separated by a distance of some 75 miles, this Court properly held
that the expenses incurred in New Orleans, while away from his
permanent residence, were deductible traveling expenses, rather
than personal commuting expense. Judge Putnam was neither required
by law to maintain two homes nor placed in a position where he
needed to take lodgings or rest before returning home to Abbeville
each day. The LeBlanc exception, therefore, does not transform
Judge Putnam's expenses into deductible traveling expenses.
9
The Supreme Court has also recognized that when employment is
temporary, rather than indefinite or indeterminate, the taxpayer's
tax home may be his place of residence rather than the temporary
workplace. Peurifoy v. Commissioner, 358 U.S. 59 (1958). However,
no serious attempt has been made to bring Judge Putnam's service in
the Lafayette courthouse, which spanned two years, within the
Peurifoy exception.8 Thus, under the law applicable to the
ordinary taxpayer, Lafayette, and not Abbeville, was Judge Putnam's
tax home and his expenses were not incurred "away from home" as
required by § 162(a)(2).9
B. Requirement that travel expenses be incurred in pursuit of a
trade or business.
Travel expenses must also be incurred "in pursuit of a trade
or business." I.R.C. § 162(a)(2). To be characterized as such, a
taxpayer must travel beyond the point where he commutes on a daily
basis to execute the functions of his office. Flowers, 326 U.S. at
473. The cost of commuting is unquestionably a personal, and
therefore nondeductible, expense. Id. at 470 (meals, lodging and
transportation expenses incurred in commuting are nondeductible
8
In 1992 Congress amended § 162(a) by expressly providing
that taxpayers will not be treated as being temporarily away from
home if the period of employment exceeds one year. I.R.C. §
162(a).
9
Although the location of a taxpayer's tax home is generally
a question of fact that is determined by the circumstances of the
individual case, the legal principles which guide that
determination have long been established. Michel v. Commissioner,
629 F.2d 1071, 1073 (5th Cir. 1980). Because the parties have
stipulated to all of the necessary facts, this Court can, by
applying well-established legal principles, decide the location
of Judge Putnam's tax home.
10
personal and living expenses); Steinhort v. Commissioner, 335 F.2d
496 (5th Cir. 1964) ("[d]eeply ingrained in the whole tax structure
-- memorialized now by literally hundreds of tax rulings, Tax and
other Court decisions in such numbers as to give some factual
credence to what is so often pure fiction that Congress by
legislative non-action has put its imprimatur upon a settled
administrative practice -- is the basic proposition that the cost
of going to and from home and an established place of business is
a nondeductible expenditure"); see also I.R.C. § 262 ("no deduction
shall be allowed for personal, living, or family expenses").
Commuting expenses are not incurred in pursuit of business and are
therefore not deductible as a traveling expense under § 162(a)(2).
Flowers, 326 U.S. at 470 & 474; see also United States v. Correll,
389 U.S. 299 (1967) (meal expenses incurred traveling are not
deductible unless the traveler was required to sleep or rest before
returning home).
The Putnams' argument that the meal expenditures are
nonetheless deductible under the more general "ordinary and
necessary" provisions of § 162 is equally unprevailing. Meals are
not deductible unless the expense is different from or in excess of
that which would have been made for the taxpayer's personal
purposes. Moss v. Commissioner, 758 F.2d 211, 213 (7th Cir.),
cert. denied, 474 U.S. 979 (1985). Judge Putnam alleges no purpose
for his lunches, other than his own subsistence, and we can not see
how these expenditures aided the development or business of the
federal district courts. The federal courts did not dictate the
11
location, duration or content of Judge Putnam's mid-day meals. See
Christey v. United States, 841 F.2d 809 (8th Cir. 1988), cert.
denied, 489 U.S. 1016 (1989) (holding that because state imposed
substantial restrictions on state trooper's lunch arrangements,
lunch expenses were deductible as "ordinary and necessary" business
expenses under general provisions of § 162(a)).
Similarly, the argument that Judge Putnam would not have
incurred the expenses "but for" the fact that he was recalled to
service in Lafayette cannot prevail. The fact that an expense
would not have been incurred "but for" the taxpayer's engaging in
a trade or business is not sufficient to allow a deduction when the
expense is personal or otherwise nondeductible. Both commuting and
daily meal expenses are classic examples of expenses which may
enable a taxpayer to work but which are not incurred in the conduct
of that trade or business. Under the rules applicable to the
ordinary taxpayer, Judge Putnam's automobile and meal expenses were
neither "necessary" under the general provisions of § 162 nor
incurred "in pursuit of business" as required by § 162(a)(2).
JUDGES AS TAXPAYERS: THE EFFECT OF
THE JUDICIAL REIMBURSEMENT STATUTES ON THE
DEDUCTIBILITY OF BUSINESS EXPENSES
UNDER THE TAX CODE
The district court allowed the judicial reimbursement
provisions in 28 U.S.C. § 374 and 456 to suspend application of
these well-settled tax principles; it found that Abbeville was not
only Judge Putnam's "official duty station" pursuant to 28 U.S.C.
§§ 374 and 456, but also his "tax home" for purposes of I.R.C. §
12
162(a)(2), and that his expenses were incurred "in pursuit of
business." The district court reasoned that Congress, by
designating a retired judge's residence as his "official duty
station" and by providing reimbursement for travel from that point,
intended to extend an automatic tax deduction to these expenses as
well.
We are not persuaded. By their terms, the judicial
reimbursement statutes merely provide that retired judges, once
recalled, will be reimbursed for travel from the place of their
residence rather than from the place of their last official duty
station. 28 U.S.C. §§ 374 & 456. Neither the reimbursement
statutes nor the Internal Revenue Code purports to alter the
existing tax laws controlling the deductibility of these expenses.
In fact, 28 U.S.C. § 374 appears to expressly limit its application
to entitlement to reimbursement under section 456. See 28 U.S.C.
§ 374 (defining the official duty station of retired judges "for
the purposes of section 456 of this title" (emphasis added)).
Likewise, the legislative history of § 374 does not indicate that
Congress intended to alter application of the usual tax laws as to
the reimbursements allowed by that provision. What the legislative
history indicates is that Congress wanted to insure that retired
federal judges being recalled to service would be fully reimbursed
for travel from their point of origin, their residence, rather than
from the point of their last official duty station.10
10
Prior to the 1959 amendment, a retired judge was
reimbursed for travel and subsistence expenses based upon a
hypothetical departure from his last official duty station,
13
Absent express language supporting their position, appellees
urge that Commissioner v. Stidger, 386 U.S. 287 (1967), stands for
the proposition that the court can properly rely upon the policy
underlying statutes outside the Internal Revenue Code when
determining the location of a taxpayer's tax home. In Stidger the
issue was whether meals taken by a military officer during a 10-
month tour of duty in Japan were deductible travel expenses. The
Stidger court held that the meal expenditures were nondeductible
living expenses, relying on the Commissioner's interpretation of
"home" as it applies to military personnel. 386 U.S. at 295-96.
That interpretation, which disallowed deductions incurred at the
officer's permanent duty station, was in fact just an enlargement
of the general principle that a taxpayer's tax home is located at
his principal place of business. See Stidger, 386 U.S. at 290-93
(discussing the general principle and the enlargement of that
principle applicable to military personnel). Thus, the Stidger
court was not reading between the statutory lines, as the appellees
request this Court to do. Instead, Stidger merely deferred to
rather than his place of residence. This rule led to some
cumbersome and inequitable results. "For example, a judge who had
been appointed to the U.S. District Court for the District of
Columbia and who, upon retirement, moved his residence to
somewhere in the Western part of the United States, could accept
a judicial assignment to sit in the Southern District of New
York. However, reimbursement for his travel and subsistence
expenses would have to be measured from the District of Columbia
to New York and not from his home in the Western part of the
country." S. Rep. No. 86-998, 86th Cong., 1st Sess. (1959),
reprinted in, 1959 U.S.C.C.A.N. 2022. Congress was concerned that
it was "unfair to expect a judge to travel across the country and
back without being reimbursed for that travel." (emphasis added)
Id. The tax treatment of the reimbursements thus provided is
mentioned nowhere in the report.
14
long-standing Commissioner rulings and existing law as it applied
to determination of a taxpayer's home in a specific context. See
Stidger, 386 U.S. at 296 ("if there are inconsistencies in the
Commissioner's application of the travel-expense provision to
military personnel, it is the province of Congress and the
Commissioner to make the appropriate adjustments").
15
CONCLUSION
We hold, in accordance with well-established tax principles,
that Judge Putnam's tax home was his principal place of business at
the Lafayette courthouse. Therefore, the automobile and meal
expenses he incurred as a result of his commute from his residence
in Abbeville to his workplace at the Lafayette courthouse were not
incurred "away from home in the pursuit of a trade of business" and
were not deductible as traveling expenses. His meal expenses were
also not deductible as "ordinary and necessary" business expenses
under the more general provisions of I.R.C. § 162(a) because no
business purpose for the meals was demonstrated. It follows that
AO reimbursements for both types of expense must be reported as
taxable income.11
We acknowledge that our holding today will have the effect of
reducing the value of travel reimbursements received by retired
federal judges recalled to duty, in some circumstances. However,
the effect is not as drastic as is emphatically urged by the
Putnams and amicus. We do not decide that the tax home of all
retired federal judges returning to work will be the courthouse to
which they are assigned. Our holding should be limited to cases
presenting facts similar to those which drive our decision today.
Judge Putnam, after serving fourteen years as a district judge in
Lafayette, was recalled to serve at the same courthouse, where he
11
Because we find that the meal expenses were not
deductible, treasury regulation 26 C.F.R. § 1.162-17(b), which
excuses reporting of reimbursement for otherwise deductible
business expenses when certain conditions are met, is
inapplicable.
16
was provided chambers and a staff. He made the same commute,
approximately 20 miles, that he made each day of his active
service. The 20 mile journey did not impose upon him the need to
take lodgings or substantial rest and he returned easily to his
home of over 40 years each night. Judge Putnam's service extended
throughout substantial portions of 1985 and 1986. At some point,
and we need not decide exactly when, his service ceased being
"temporary" but instead became more indefinite or permanent.
Finally, his meals in Lafayette were for his own subsistence and
were not intended to further in any way the business of the federal
courts.
Clearly, when retired federal judges incur necessary and
ordinary expenses traveling "away from home in pursuit of business"
as defined in the tax code, those expenses will not only be
reimbursable under 28 U.S.C. §§ 374 and 456, but also tax
deductible under I.R.C. § 162(a)(2). Such is not the case here.
On the other hand, when a retired federal judge is recalled to
serve in a courthouse to which he can easily journey on a daily
basis without requiring sleep or rest, the expenses occasioned by
such a commute -- while they may be reimbursable -- will not be
deductible as traveling expenses.
If Congress wants to change this result, it has the power to
do so. Compare, for example, the specific provisions in § 162
defining the "tax home" of Congress members and state legislators
to be their place of residence within the territory they represent.
I.R.C. § 162(a) (specifying tax home for member of Congress and
17
limiting the amount of deductible expenses), § 162(h) (designating
the tax home of state legislators who make an appropriate election
and specifying that such legislators are "away from home in pursuit
of business" on each legislative day).
For the average taxpayer, there is strong and clear law which
characterizes these expenditures as nondeductible commuting
expenses. Because we are not convinced that Congress intended to
suspend application of the existing tax laws when it passed 28
U.S.C. § 374, we are unwilling to do so by judicial fiat some 25
years later. Legislating the matter from the bench, particularly
when the subject is reimbursement to members of our own branch of
government, is not within the province of this Court. We do not
sit as a committee of revision to perfect the administration of the
tax laws. United States v. Correll, 389 U.S. 299, 306-307 (1967).
In this area of limitless factual variations, "it is the province
of Congress and the Commissioner, not the courts, to make the
appropriate adjustments." Commissioner v. Stidger, 386 U.S. 287,
296 (1967).
Judges are subject to the tax laws on the same basis as an
ordinary citizen, unless that result is changed by Congress.
"[T]heir particular function in government does not generate an
immunity from sharing with their fellow citizens the material
burden of the government whose Constitution and laws they are
charged with administering." O'Malley v. Woodrough, 307 U.S. 277,
282 (1939).
18
Accordingly, we REVERSE the district court's summary judgment
in favor of the Putnams and RENDER summary judgment in favor of the
Government. The plaintiffs will take nothing on their refund
claim.
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VES/mek/wjl 19
No. 93-4969 RICHARD J. PUTNAM, ET UX v. UNITED STATES OF AMERICA
REYNALDO G. GARZA, Circuit Judge, Concurring Specially;
I agree with everything in the very fine opinion of Judge
DeMoss.
As a senior judge, I write specially to tell amicus and my
fellow senior judges that this was not the best of cases to try the
validity or extent of 28 USC §§ 374 and 456 and their relationship
to the tax laws.
If during his active service Judge Putnam had lived in
Lafayette and upon his taking senior status he had moved and
started residing in Abbeville, I think the result in this case
might well have been different.
As Judge DeMoss points out, the result in this case is because
of the facts involved and it will be the law only in cases with
similar facts in the future.
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