Petition — McCabe v. Commissioner

82-54 “yitte

JUL © 1962

IN THE ALEXANDER L. STEVAS.,

SUPREME COURT OF THE UNI Wea sraSheeX |

¢

OCTOBER TERM 1982

No.

DENNIS MCCABE

Petitioner-Appellant

- against -

COMMISSIONER OF INTERNAL REVENUE

Respondent~Appellee

PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED

STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Paul S. Brenner

Attorney for PetitionerAppellant

John Maguire, of counsel

LAW OFFICES OF RICHARD HARTMAN

252-00 Horace Harding Exp.

Little Neck, NY 11362

(423-1800)

QUESTIONS PRESENTED

1) WHETHER PERSONAL CHOICE OF RESIDENCE

NEGATES THE DEDUCTABILITY OF ADDITIONAL

COMMUTING COSTS WHICH WERE PREVIOUSLY

DEDUCTABLE PURSUANT TO THE COURT'S HOLDING

IN FAUSNER V. COMMISSIONER?

2) WHETHER ARMED POLICE OFFICERS WHO MUST

TRAVEL AN INDIRECT ROUTE TO WORK AS A RESULT

OF AN ADJACENT STATE'S PROHIBITION AGAINST

POSSESSION OR TRANSPORTATION OF WEAPONS,

CAN DEDUCT THE ADDITIONAL COMMUTING EXPENSE?

3) WHETHER A WEAPON CAN BE CONSIDERED A

REQUIRED TOOL FOR PURPOSES OF SECTION 162

OF THE INTERNAL REVENUE CODE?

INDEX

ii

PAGE

QUESTIONS PRESENTED......ccccescccessees

OPINION BELOW... cccccccccccccccccceseces

JURISDICTION... .cccccccccccccccsccccccces

STATUTORY PROV.SIONS INVOLVED...........

STATEMENT OF THE CASE.....ccsssccseseees

REASONS FOR GRANTING THE NS SR Pee

1. THE COURT OF APPEALS DECISION

i

nw

WOULD RENDER MEANINGLESS AND ELIMINATE

ALL FAUSNER-TYPE DEDUCTIONS AND CREATES

CONFUSION AND INDECISION IN THE

APPLICATION OF THE LAW GOVERNING

SUCH Ds 66 babs cbhsccdocduan

2. THE COURT OF APPEALS DECISION WAS

CLEARLY ERRONEOUS AND IN CONFLICT

WITH THE REQUIRED TOOLS EXCPETION

9

TO THE COMMUTER RULE......ese+0+0+216

Ces > a Cob oe cb Re SeaOes 0d ceecetgeone

APPENDIX

OPINION AND JUDGMENT OF COURT OF

APPEALS 2.0 cccccccccccececccc + cApp. 1

PAGE

OPINION AND JUDGMENT OF TAX COURT

eee eeereeeeeeeceseseeesccscees sADp. 27

REVENUE RULING 75-380.......c0000++57

REVENUE RULING 63-100..........2+++66

CITATIONS

CASES

Chenango Textile Corp. v. Commissioner

148 F2d 296 (2nd Cir. 1945)....... 22

Coker v. Commissioner 487 F2d 593

(2nd Cir. DSS Sa oS

Commissioner v. Flowers 326 U.S. 465

(1946) weccccccccvcsssescccvcccccec tO,31,34,

17

Commissioner v. Heininger 320 U.S.

467 [Rr sa 66.6 oe bee uo) 0.0066 6 Cntoun

Fausner v. Commissioner 413 U.S. 838

Pere 6 oss 6s 66 bE Sb ou cec.cews Foe oe Beas

Rice v. Riddell 179 F Supp 576

(1959) we eee ence ener e eee eeeeeeeeee dg

Sulivan v. Commissioner 368 F2d

1007 (2nd Cir. 1966) ....c.cceeeee -18

ne v. Commissioner 385 F2d 40

(7th Cir. 1967) ..-ceeeeeeeeeeeeeee 16,17

MISCELLANEIOUS

iv

PAGE

26 Baylor Law Rev. 262 (1974)...10

Rev. Rul. 75-380.....ceeeee02+++10,18,19

Rev. Rul. 63-100........02202+--16

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1982

st ttt tt lll ew me we ee ee ee ener on - X

DENNIS MCCABE

Petitioner-Appellant

- against -

COMMISSIONER OF INTERNAL REVENUE wo.

Respondent~Appellee

meee em em em ee eee me eee Oe eee ee ee eee eee x

The petitioner Dennis McCabe respectfully

prays that a writ of certiorari issue to

review the judgment and opinion of the United

States Court of Appeals for the Second Circuit

entered in this proceeding on April 14, 1982.

OPINION BELOW

The opinion of the Court of Appeals,

not yet reported, appears in the Appendix

attached hereto. The opinion of the United

States Tax Court is reported at 76 T.C. 876

(1981) and appears in the Appendix hereto

affixed.

JURISDICTION

The judgment of the Court of Appeals

for the Second Circuit was entered on April

14, 1982. This petition for certiorari

was filed within 90 days of that date and

is timely. This Court's jurisdiction is

invoked under 28 U.S.C. Section 1254(1).

STATUTORY PROVISIONS

SECTION 162 TRADE OR BUSINESS EXPENSES

(a) IN GENERAL - There shall be allowed

_ as a deduction all the ordinary and neces-

sary expenses paid or incurred during the

taxable year in carrying on any trade or

business, including--

(1) a reasonable allowance for salaries

or other compensation for personal services

actually rendered;

(2) travelling 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!?) AND

(3) rentals or other payments

required to be made as a condition to the .

continued use or possession, for purposes

of the trade business, of property to

which the taxpayer has not taken or is

not taking title or in which he has no

equity.

L-

STATEMENT OF THE CASE

This case involves the question of

whether additional commuting expenses

incurred by a New York City Police Officer

who was prohibited from travelling through

the State of New Jersey with his firearm,

are deductable business expenses pursuant

to Internal Revenue Code Section 162 and

Revenue Ruling 75-380.

New York City Police Department regulations

required that all police officers be armed at

all times while within the City of New York.

Petitioner, a New York City Police Officer,

resided in Suffern, New York, a suburb

north of New York City and adjacent to

New Jersey. The most direct and least

costly route of travel by either car or

public transportation between petitioner's

residence and place of employment is through

the State of New Jersey. All parties in-

volved in this litigation stipulated that

New Jersey law prohibits petitioner and

other similarly situated New York City

police officers from carrying their service

revolvers through New Jersey on a daily

basis. It was further stipulated that New

Jersey authorities will only issue gun

permits to persons who individually

establish urgert need to possess a gun

within the State of New Jersey.

Petitioner maintains and the Tax

Court found as fact?

that petitioner would

have utilized less expensive means of

commuting to work but for the New Jersey

prohibition which precluded petitioner

from carrying his service revolver on

either public or private transportation

through the State of New Jersey.

Petitioner because of the New Jersey

See McCabe v. Commissioner of Internal

Revenue 76 T.C. 876, 881 (1981) “we accordingly

find as a fact that petitioner would have

commuted to work by using the bus or subway

but for the necessity of carrying his service

revolver.”

ia

prohibition was forced to travel to work

in his private car entirely on New York

roads. Travelling entirely through New

York caused petitioner to incur additional

expenses consisting of an additional(.50)

fifty cent toll and an additional commuting

distance of thirty miles each day.

Petitioner on his 1976 tax return claimed

a deduction for the cost of his employer's

requirement that he be armed at all times

within the City of New York. The Commissioner

disallowed the deduction and petitioner

instituted the present litigation.

The majority of the Tax Court concurred

to an opinion writcen by Judge Raum. The

Court found as fact that petitioner did

incur additional expenses because of his

employer's requirement that he carry his

service revolver but disallowed the deduction

because the expenses were related to

additional commuting costs which according

to the majority's reasoning were personal

in nature and therefore nondeductable.

In a concurring opinion Judge Scott

>

6

expressed the view that additional expenses

for carrying tools would be deductible only

if the expenses were in the nature of trailer

rental costs.

Judge Fay and Sterrett wrote dissenting,

opinions which stated that petitioner's

additional expenses were incurred as a

result of his employer's requirement that

he be armed and thus were deductible

business expenses. Judge Wiles and Wilbur

joined Judge Strerrett's dissent.

Petitioner appealed the Tax Court

decision to the United States Court of

Appeals Second Circuit. Circuit Judge

Cardamone joined by District Judge Holden 2

affirmed the majority cpinion of the tax

court. The Court noted the exception to

the general rule against deducting commuting

expenses which appears in Fausner v.

3

Commissioner but held that petitioner could

Judge Holden, Chief Judge of the United

States District Court for the District of

Vermont was sitting by designation.

3

Fausner v. Commissioner, 413 U.S. 838 (1973).

not deduct his added cost because he chose

to live in the suburbs and thus burden

himself with additional expenses. Judge

Cardamone stated that since the Supreme

Court had “provided little or nw guidance

as [to] what kind of circumstances should

trigger “an allocation of expenses, there

was no basis upon which to find petitioner's

expenses deductible. The Court held that

petitioner's expenses could not be “ordinary

and necessary" nor related to his employer's

requirement that he carry a gun, when the

petitioner chose to live outside New

York City.

Circuit Judge Meskill in his dissent

found that petitioner incurred additional

expenses by circumventing New Jersey

because of his employer's requirement that

he carry his firearm at all times while

within the City of New York. The dissent

held that these additional expenses should

be allocated as business expenses under

4

Fausnéer and pursuant to Rev. Rul. 75-380.

, 8

Judge Meskill in his dissent pointed out

that the majority's reasoning would render

meaningless almost all Fausner-type

deductions since a taxpayer can always

reduce or eliminate excess commuting costs

by living closer to his work location.

The dissent concluded that to the extent

petitioner's change in route of travel

was necessary to satisfy his employer's

requirement the* he be armed, he was

entitled to a deduction under 162(a) of

the Internal Revenue Code.

Petitioner now prays that this Court

grant relief from the adverse decision

of the United States Court of Appeals

for the Second Circuit.

r

See Rev. Rul. 75-380 attached hereto in

the Appendix and which states that additional

commuting expenses incurred for transporting

work implements to and from work are

deductible as ordinary and necessary

business expenses.

REASONS FOR GRANTING THE WRIT

THE COURT OF APPEALS DECISION

WOULD RENDER MEANINGLESS AND

ELIMINATE ALL FAUSNER-TYPE

DEDUCTIONS AND CREATES CONFUSION

AND INDECISION IN THE APPLICATION

OF THE LAW GOVERNING SUCH DEDUCTIONS

The Court in Fausner v. Commissioner

held that expenses incurred by happenstance

that a taxpayer must carry incidentals of

his occupation are nondeductable. However,

the Court noted that “additional expenses

may at times be incurred for transporting

job-regquired tools and material to and

from work." Under such circumstances an

allocation of costs between personal and

business expenses should be made.

This Court has never defined when and

how additional expenses may be deducted,

nor if Fausner-type job required tool

deductions are applicable to commuting

Fausner v. Commissioner 413 U.S.

838 (1973).

10

expenses. Until the instant Court of

Appeals decision, the Internal Revenue

Service as well as commentators interpreted

Fausner as allowing deductions for additional

commuting expenses incurred as a direct

result of an employer's requirement that

an employee transport certain tools or

material to and from work?.

The Court of Appeals Second Circuit

3

has held in the instant matter that such

deductions are subject to the ‘personal

choice’ doctrine which is articulated in

4

Commissioner v. Flowers . The majority

Opinion relying on Flowers, denied petitioner's

deductions because petitioner chose to live

in the suburbs. The Appeals Court reasoned

that petitioner's added expenses were

attributable to his decision to reside in

Suffern, New York, not due to his employer's

requirement that he be armed. Such logic

is clearly refuted by the simple proposition

See Internal Revenue Ruling 75-380

See 26 Baylor Law Rev. 262 (1974)

3 McCabe v. Commissioner - F2d-(1982)

Opinion attached heretofore in the

Appendix.

11

that no matter where petitioner resided,

he, would not have incurred any

additional commuting expenses if the

employer had not required that he carry

his service revolver at all times within

the City of New York.

The Second Circuit's logic inhibits

any deduction for tools or material required

by the employer to be transported between

home and work since an employee can theoret-

ically live next door to his employment

and thus avoid any additional expenses

necessitated by the transportation of

tools or material. The Court of Appeals

decision thus precludes any Fausner-type

deductions and paves the way to applying

the Flowers ‘personal choice’ doctrine

to innumberable inopposite situations.

Concerned with the instant litigation

are over one thousand (1009) New York City

police officers who reside in northern

4

Commissioner v. Flowers 326 U.S. 466

(1945). In Flowers the Court established

a three part test to determine the deductability

of travelling expenses. The personal choice

doctrine was directed at a taxpayers decision

to establish two residences and is not dis-

positive of the required ‘tool exception’

noted in Fausner.

12

New York suburban counties that are adjacent

to New Jersey. These police officers as

well as petitioner are prohibited from

carrying their service revolvers through

the State of New Jersey. Subsequently,

these officers must incur additional commuting

expenses to circumvent that state. Many

of these police officers have been deducting

the additional commuting expense since at

least 1973, and in some cases have continued

taking the Fausner-type deduction through

the current tax year : - Millions of dollars

of questionable deductions are involved

just with taxpayers closely connected to

the instant litigation $i

5

The McCabe decision was decided on

April 14, 1982, the last day on which to

prepare tax returns before the April 15th

deadline.

6

Petitioner is represented by general

counsel to the New York City Patrolmen's

Benevolent Association. The instant liti-

gation was instituted to determine the appli-

cability of Fausner-type deductions to

officers living in Northern suburban New

York communities.

7a. wa

13

Moreover, the instant litigation

affects thousands of other litigants. As

Judge Meskill indicated in his dissent the

decision eliminates all Fausner-type

deductions because ultimately all additional

commuter costs are a result of ‘personal

choice’ of the location of one's residence.

The decision is in conflict with Rev. Rul.

75-380 and would eliminate deductions for

carpenters, plumbers and others who must

utilize vans or trailers to transport

employer required tools to and from work.

The decision also affects musicans and

painters who incur additional expenses to

transport bulky instruments or material

between home and work.

The ‘personal choice’ analysis utilized

by the majority decision has implications

for certain deductions taken by trucking

companies, railroads and manufacturers.

Trucks and other vehicles transporting

flammable, hazardous or radioactive materials

are often limited to certain routes and

prohibited from entering population centers.

14

These companies choice of corporate locale

affects the cost of complying with these

prohibitions and restrictions in the exact

manner that petitioner's choice of residence

effects his added cost of commuting 7 °

In Flowers the Court stated that

expenses incurred for travel between res-

idences a taxpayer maintained in two different

cities were expenses occasioned solely by

the taxpayers personal propensities.

Flowers is not dispositive and factually

distinguished from the instant matter.

Petitioner pursuant to his employer's

directive, had to transport his weapon

between home and work. In avoiding a New

Jersey prohibition against carrying weapons

through that state petitioner incurred

additional expenses he would not normally

have incurred.

.

It is important to note that petitioner's

place of employment is located in Manhattan.

Housing costs preclude petitioner from resid-

ing in Manhactan. Average monthly rental

costs for a 5 room apartment exceed petitioner's

monthly salary.

15

Flowers is inapplicable because petitioner

transported his gun in furtherance of his

employer's business of enforcing the law

within the City of New York. Petitioner

gained no personal benefit from traveliing

to work armed; but rather furthered his

employer's objective by being prepared

to enforce the law at all times within

the city, whether or not he was on duty.

If in fact Fausner-type deductions

are allowable then petitioner is entitled

to deduct the additional cost of commuting

incurred as a result of the requirement

that he transport his service revolver

between home and work.

16

THE COURT OF APPEALS DECISION

WAS CLEARLY ERRONFOUS AND IN

CONFLICT WITH THE 'REQUIRED

TOOLS' EXCEPTION TO THE

COMMUTER RULE

The general rule concerning commuting

expenses is that the cost of commuting or

driving to work is a nonmeductible personal

expense. Such expenses are nondeductible

because they lack a necessary and direct

1

relation to the prosecution of business.

An exception to the above rule was

created in Rice v. Riddell 2 where the

district court permitted a musician to

deduct the cost of transporting his in-

3

strument to and from work. Rice v. Riddell

4

formed the basis of Rev. Rul. 63-100

which established the “but for” test to

determine the deductability of commuting

expenses. Pursuant to Rev. Rul. 63-100

if a taxpayer would not have incurred

certain expenses but for the necessity

of taking his job-required tools with him

to work then such expenses were deductible.

In Tyne v. Commissioner ; the 7th Circuit

adopted an allocation rule and held that

17

“even if a taxpayer had driven to and from

work had it not been necessary to transport

his tools,” he should be allowed to deduct

the portion of his driving expenses which

were allowable to the Transportation of

Tools.

Commissioner v. Flowers 326 U.S. 465,

473 (1946).

‘ Rice v. Riddell 179 F. Supp. 576 (1959).

‘ A tuba and violin.

, Rev. Rul. 63-100 attached hereto in

the Appendix, was superseded by Rev.

Rul. 75-380.

5

Tyne v. Commissioner 385 F2d 40(7th

Cir. 1967).

6 18

In Fausner v. Commissioner, the Court

addressed a conflict between the 5th Circuit ’”

which refused to allow an allocation of

driving expenses merely a tools

were carried, and the Second and Seventh

Circuits P which allowed a portion of

expenses to be deducted as ordinary and

necessary. In Fausner the Court held that

commuting expenses could not be considered

ordinary and necessary merely because a

taxpayer must carry incidentals of his

occupation with him. However, the Court

further stated that an allocation of costs

may be feasible when additional expenses

are incurred for transporting job-required

tools.

Following Fausner the Second Circuit

10

in Coker v. Commissioner held that Sulivan

was overruled. In Coker the Court held

that a taxpayer cannot deduct the cost

of driving if he would have utilized his

automobile even if not required to carry

tools.

In 1975 the Commissioner issued

Rev. Rul. 75-380 and revoked Rev. Rul.

es

19

63-100. In Rev. Rul. 75-380 the Commissioner

eliminated the “but for” test and stated.

that where a taxpayer incurs additional

costs above ordinary commuting expenses

because of the necessity of transporting

work implements to and from work, he is

ll

entitled to deduct such additional costs .

~—

Fausner v. Commissioner 413 U.S. 838

(1973). , .

Pausner.

8

See Sulivan v. Commissioner 368 F2d

1007 (2nd Cir. 1966).

aq >

Tyne v. Commissioner 385 F2d 40(7th

Cir. 1967}

10

Coker v. Commissioner 487 F2d 593

(2nd Cir. 1973).

ll

Rev. Rul. 75-380 states in part

"thus, where a taxpayer can prove that

transportation costs were incurred in

addition to the ordinary, nondeductible

commuting expenses, and these additional

costs are attributable solely to the

necessity of transporting work implements

to and from the work location, the .ax-

footnote 11 continued

payer will be entitled to deduct such

additional costs under Section 162 of

the code, regardless of whether the

primary purpose or “but for" test set

forth in Rev. Rul. 63-100 is satisfied.”

(See Appendix attached heretofor for full

text of opinion).

z1

Petitioner in the instant matter

incurred additional expenses he would

not have ordinarily incurred except for

the necessity of transporting his

service revolver to and from work. The

majority opinion in the Tax Court found

as fact that petitioner incurred additional

expenses he would not have ordinarily

incurred except for the necessity of

transporting his service revolver to and

from work. The majority opinion in the

Tax Court found as fact that petitioner

incurred additional commuting expenses

solely because of his employer's requirement

that he be armed at all times within the

City of New York. The Court stated:

"We accordingly find as fact that

petitioner would have commuted to

work by using the bus and subway but

for the necessity of carrying his

seraice revolver." McCabe v. Commissioner

76 T.C. 876, 881 (1981).

Once the Tax Court found that petitioner

incurred additional expenses he would not

have incurred “but for” his employer's

22

requirement that he carry his service

revolver; the Tax Court and Court of

Appeals were precluded from finding that

the expenses were personal and nondeductible.

The Court of Appeals assertion that

the Tax Court decision was the result of

a determination of factis clearly erroneous

and illogical. As indicated above the

facts as found by the Tax Court clearly

demonstrated that petitioner incurred

added expenses because of his employer's

requirement that he be armed. The deter-

mination to disallow this deduction as

personal was purely a legal determination

in which a question of law was unmistakably

involved 12. The Court of Appeals reliance

on Chenango Textile Corp. v. Commissioner

148 F2d 296 (2nd Cir. 1945)

and Commissioner v. Heininger 320 U.S. 467

(1943) to uphold the Tax Court decision

is misplaced and erroneous. Once the Tax

Court found that petitioner incurred

additional expenses because of his

employer's requirement that he be armed,

it was clearly an erroneous decision to

23

deny petitioner's deduction. The Tax

Court decision was contrary to the exception

noted in Fausner and in direct conflict

with the guidelines articulated in Rev.

Rul. 75-380. The record definitely and

undeniably indicates that the Tax Court

misinterpreted the law governing the

deductability of additional cc..muter

expenses“. The inference derived from

the stipulated facts as well as the Tax

Court's finding, could only be interpreted

as demonstrating that petitioner incurred

additional commuting expenses solely because

of the requirement that he be armed and

enforce the law at all times within the

City of New York. The Court of Appeals,

thus applied the wrong standard of review

in the instant case and committed error

in affirming the Tax Court determination.

Iz

See Fausner, supra. Rev. Rul. 75-380.

24

CONCLUSION

The decision of the Court of Appeals

Second Circuit in McCabe v. Commissioner

rekindles the conflict and confusion that

the Court sought to resolve in Fausner

v. Commissioner. The McCabe decision

radically alters the prior standards for

determining the deductability of additional

commuting expenses caused by an employer's

requirement that tools be transported to

and from work. Furthermore, the ‘personal

choice’ analysis articulated in the McCabe

decision would render meaningless all

Fausner-type deductions. To insure uniform

application of the law and eliminate con-

fusion concerning the deductability of

additional commuting expenses, this Court

should grant the petitior for certiorari

and reverse the Judgment below.

Paul S. Brenner, Esq.

John J. Maguire, Esq.

Counsel for Petitioner

252-00 Horace Harding Exp.

Little Neck, NY 11362

(212) 423-1800