Appendix — McCabe v. Commissioner

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM 1982

Petitioner-Appellant

- against -

COMMISSIONER OF INTERAL REVENUE

Respondent-Appellee

APPENDIX

Paul S. Brenner

Attorney for Petitioner-Appellant

John Maguire, of counsel

LAW OFFICES OF RICHARD HARTMAN

252-00 Horace Harding

Little Neck, NY 11362

(423-1800)

App. 1

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 646 - August Term, 1961

(Argued January 25, 1982 Decided April 14, 1982)

Docket No. 81-4175

DENNIS McCABE

Petitioner-Appellant,

- against -

COMMISSIONER OF INTERNAL REVENUE,

Respondent~-Appellee

Before:

MESKILL and CARDAMONE, Circuit Judges,

and HOLDEN, District Judge.*

Appeal from a decision of the United States

Tax Court (en banc), Raum, J., which denied

appellant a deduction taken under I.R.C.

Section 162.

Affirmed. Meskill, C.J., dissents.

PAUL BRENNER, New York, New York (RICHARD HARTMAN

Jeffrey S. Wasserman, Law Offices of Richare

Hartman, New York, New York, on the brief),

for Petitioner-Appellant.

STEVEN I. FRAHM, Attorney, Tax Division, Dept.

of Justice, Washington, D.C. (Glenn L. Archer

Jr.., Assistant Attorney General, Weshington,

D.C., Michael L. Paup, Chief, Appellate

Section, Tax Division, Department of Justice,

Washington, D.C., Jonathan S. Cohen,

Attorney, Tax Division, Department of

Justice, Washington, D.C., on the

brief), for Respondent-Appellee.

*Honorable James S. Holden, Chief Judge of the

United States District Court for the District of

Vermont, sitting by designation.

os

CARDAMONE, Circuit Judge:

The appellant, Dennis McCabe, a police

officer employed by the City of New York,

was required to carry his service revolver

at all times while in the City. To reach

his place of employment the most direct

route from his home to Suffern, New York is

through the State of New Jersey. New Jersey

will aliow an officer such as petitioner

to carry a weapon only by permit. Stating

that he could not expect to obtain a New

Jersey permit, appellant carried his service

revolver on his person and used his own

automobile as his mode of transportation

to and from work. As a result he claimed

an employee business deduction in the amount

of $2,950 for automobile expense on his 1976

tax return. The Commissioner of Internal

Revenue, appellee, disallowed the claimed

deduction and the Tax Court affirmed that

determination. Appellant appeals from that

aecision. We affirm for the reasons which

follow.

FACTS

The facts of this case were stipulated

and may be briefly stated. At the time he

filed his petition in 1976 appellant resided

in Suffern, New York. Suffern, a relatively

remote suburb of New York City, lies west

of the Hudson River and immediately adjacent

to the State of New Jersey. Appellant was

employed as a New York City police officer

assigned exclusively to Manhattan's Twenty-

Eighth Precinct. The regulations of the

New York City PoliceDepartment then in effect

required police officers to be armed at all

times when, in the City, unless otherwise

directed The State of New Jersey, through

which petitioner would travel were he to

commute to work by the most direct route,

permits officers employed by governmental

agencies outside the State to carry weapons

in New Jersey only while engaged in official

duties and upon prior notification to local

police authorities. See N.J. Stat. Ann.

Section 2A: 151-43(a) (West 1969) (repealed

1979) (Current version of N.J. Sta. Ann.

Section

New York City police officers carrying a

service revolver through New Jersey either

by public or private conveyance would be

in violation of New Jersey law without a

New Jersey gun permit. Generally, New

Jersey authorities issue gun permits only

to those persons whose job requirements

necessitate that they be armed in New Jersey

or to persons able to establish urgent need*.

Throughout 1976 appellant used his

personal automobile as his exclusive means

of commuting to and from his duty station

at the Twenty-Eighth Precinct. While com-

muting he carried his service revolver on

his person and did not modify his automobile

to accommodatethe gun. Therefore, the

cost of operating the vehicle by carrying

a revolver was the same as it would have

been had he commuted to his job by auto-

mobile without the revolver. But the

record clearly established that appellaic's

commuting costs could have beenreduced had

he been able to travel through New Jersey.

The record further shows that ample public

transportation existed from Suffern to New

York eter Since much of the convenient

public transportation went through New

Jersey, appellant would have again been

faced with the need for a New Jersey gun

permit.

On his 1976 income tax revurn appellant

claimed $2,950 in automibile expenses as

a deduction on Form 2106, Employee Business

Expenses. This deduction represented the

commuting.costs of driving 17,600 miles

between Suffern and New York City, which

included bridge and thruway tolls. The

Commissioner of Internal Revenue disallowed

the entire deduction and the Tax Court affirmed.

DISCUSSION

At issue before us is when the ordinary

and necessary business deduction embodied

in Internal Revenue Code (I.R.C.) section

6

162 (a) (1976) may properly be claimed.

We first analyze this issue to determine

whether it is one of fact or law. In

Commissioner v. Heininger, 320 U.S. 467

(1943), the Supreme Court stated that

“(w)hether an expenditure is directly

related to a business and whether it is

ordinary and necessary are doubt’.ess pure

questions of fact in most instances.

Expect where a question of law is unmis-~

takably involved a decision of the Board

of Tax Appeals [presently the United States

Tax Court] on these issues...should not be

reversed by the federal appellate courts.”

Id. at 475 (emphasis supplied) (footnote

omitted). See, e.g., Sibla v. Commissioner,

299 F.2d 48 (7th Cir. 1962); Chenango Textile

Corp. v. Commissioner, 148 F.2d 296 (2d

Cir. 1945); Geo. J. Haenn v. Commissioner,

147 F. 2d 682 (3d Cir. 1945); see also,

7

Dobson v. Commissioner, 320 U.S. 489 (1943).

As we recognized in Chenango the

determination of whether a question is one

of law or one of fact is not alwayseasy.

This is particularly true where the lower court

cites appellate court opinions to justify

its conclusion, since it then becomes

difficult to determine whether that court

exercised its own independent judgment.

In Chenango we resolved this dilemma by

placing particular emphasis on the Supreme

Court's language in Heininger. "(S]ince

there is not a'‘quesion of law...unmistakably

involved’ we shall assume that the decision

was the result of a determination of fact

- « «" Chenango, 148 F.2d at 298.

Here we are asked to rule on the

ordinary and necessary business deduction.~

This is a factual inguiry and one which

has been answered by the Tax Court. How-

ever, as in Chenango, the lower court relied

on appellate court opinions to justify

its conclusion. Because it cannot be said

that a question of law is not unmistakably

involved, we employ the Chenango rule and

assume that the Tax Court's decision was

the result of a determination of fact. In

the context of a question of fact it will

be necessary to determine only whether the

Tax Court's decision was clearly erroneous,

i.e., not adequately supported by the

evidence, which will be discussed at II,

infra.

Internal Revenue Code section 162 is

concerned with expenses incurred as a direct

result of engaging in business. For

appellant to prevail he must establish that

his expense falls within the general pro-

visions of section 162(e) - ordinary and

necessary expenses of carrying on a trade

or business. We agree with the determination

of the Tax Court that petitioner failed to

meet his burden in this regard.

For section 162 purposes “ordinary”

means normal and expected; “necessary” means

appropriate and helpful.. Commissioner v.

Heininger, 320 U.S. at 471. Thus, the

question becomes whether petitioner's

additional expenses were appropriate, help-

ful, normal and expected under the circum-

stance or so personal in nature as to be

nondeductible under I.R.C. Section 262

(1976).

One well-established rule in tax law

is that expenses incurred as a result of

commuting from home to work are personal and

not deductible under Section 162. Treasury

Regulation Section 1.162-2(e) provides that

"([clommuters' fares are not considered as

business expenses and are not deductible."

,

Treas. Reg. Section 1.162-2(e) (1958).

See also, Treas. Reg. Section 1.262~1(b)

(5) (1972). The controlling precedent on

this issue is Commissioner v. Flowers,

326 U.S. 465 (1946).

In Flowers the Court was faced with

a case involving a taxpayer who lived in

Jackson, Mississippi and worked in Mobile,

Alabama. The taxpayer tried to deduct the

pone expenses incurred in his excursions

between the two tities and also claimed his

expenditures for meals and hotel accomodations

while in Mobile. The Supreme Court ruled

that the additional expenses, including

the commuting expenses, were not deductible.

Although Flowers was concerned mostly with

what is now I.R.C. Section 162(a) (2),

the Court's general analysis of Section

162 sheds illumination on the question

before us. In setting forth the final

prong of a three-part test of travel expense

delnckshshite = the Court stated that the

“expense must be incurred in pursuit of

business. This means that there must be

a direct connection between the expendi-

10

ture and the carrying on of the trade or

business of the taxpayer or of his employer.

Moreover, such an expenditure must be neces-

sary Or appropriate to the development and

pursuit of the business or trade.” 326 U.S.

at 470. The Court concluded that the travell-

ing expenses were "not incurred in pursuit

of the business of the taxpayer's employer.”

Id.at 473. Further, the added costs were

said to be “unnecessary and inappropriate”

to the development of the employer's bus-

iness. Id. The Court was of the view that

the sole cause of the expense was the tax-

payer's personal desire to reside in Jackson,

"a factor irrelevant to the maintenance and

prosecution of the [employer's] legal bus-

iness." Id. Thus, personal convenience

cannot be the motivating factor behind a

Section 162(a) deduction. Where one chooses

to live is generally a matter of personal

convenience. See, e.¢g., Hitt v. Commissioner,

55 T.C.: 628 (1971); Gilberg v. Commissioner,

55 T.C. 611 (1971).

An exception to the commuting rule

appears in Fausner v. Commissioner, 413 U.S.

1l

838 (1973). Fausner acknowledged that

woumlrecting expenses are not deductible.

"Congress has determined that all tax-

payers shall bear the expense of commuting

to and from work without receiving a

deduction for that expense. We cannot

read Secticn 262 of the Internal Revenue

Code as excluding such [commuting] expense[s]

from ‘personal’ expenses because by happen-

stance the taxpayer must carry incidentals

of his occupation with him.” 413 U.S. at

839 (footnote omitted). The brief per

curiam states, however, that "[(a]dditional

expenses may at times be incurred for trans-

porting job-requested tools and material

to and from work. Then an allocation of

costs between ‘personal’ and ‘business’

expenses may be feasible.” Id. (footnotes

omitted). While the Court provides little

or no guidance as what kind of circumstances

should trigger such an allocation, its

spacific reference to the commuter rule

would indicate that the requirements of

Section 162(a) - ordinary and necessary -

must first be established before reaching

12

the reaching the additional step of allo-

cating.

The Internal Revenue Service in Revenue

Ruling 75-380, 1975-2 C.B. 59 sought to

explain Fausner. It stated that for

additional expenses to be deductible the

taxpayer must first establish “the necessity

of transporting work implements to and from

work." 1975-2 C.B. at 60. Giving the word

“necessity” its usual meaning in tax law,

it again appears that the taxpayer must

establish that the additional expenses

were appropriate and helpful to the

employer's legal bus.iness and not personal

in nature.

II

With this background in mind we may

resolve the case presently before us.

Appellant has argued that he may deduct

the additional travellingexpense incurred

by reason of the use of his automobile in

transporting his police revolver. However,

a majority of the Tax Court ruled, sitting

en banc:

13

that petitioner's additional

commuting expenses were not

directly connected with the

pursuit of his employer's

business, but were principally

the result of his decision to

reside in a comparatively remote

suburb adjacent to New Jersey.

Accordingly, petitioner is

entitled to no deduction for

his commuting expenses under

section 162(a), I.R.C. 1954,

since such expenses were not

necessary for the conduct of

his employer's business.

McCabe v. Commissioner, 76 T.C. 876, 881

(1981).

We turn now to the applicable scope

of appellate review on an appeal from the

Tax Court. This standard is set forth in

26 U.S.C. Section 7482(a) (1976) which

states that "(t]he United States Court of

Appeals shall have exclusive jurisdiction

to review the decisions of the Tax Court...

in the same manner and to the same extent

as decisions in the district courts in

civil actions tried without a jury...”

Federal Rule of Civil Procedure 52(a)

states that findings of fact shall not be

set aside unless clearly erroneous. "A

finding is ‘clearly erroneous’ when although

there is evidence to support it, the review-

14

ing court on the entire evidence is left

with the definite and firm conviction

that a mistake has been committed."

United States v. United States Gypsum Co.,

333 U.S. 364, 395 (1948). See, e@.g.,

Commissioner v. Duberstein, 363 U.S. 278,

291 (1960). While Taylor v. Lombard, 606

F.2d 371, 372 (2d Cir. 1979), citing both

Smith v. Regan, 583 F.2d 72, 76 (2d Cir.

i978) and United States ex rel Lasky v.

LaValleem 472 F.2d 960, 963 (2d Cir. 1973),

indicates the "clearly erroneous" standard

applies only when live testimony and credi-

bility factors are involved, the standard

also extends to findings derived from in-

ferences drawn from documents or undisputed

facts. United States Gypsum Co., supra,

333 U.S. at 394. See also United States v.

Florida, 482 F.2d 205, 208 n. 8.

We are persuaded that the critical

finding of the Tax Court, as set out above,

is adequately based on permissible inferences

derived from the stipulated facts. Since

the record does not generate a definite

15

and firm conviction that a mistake has been

committed, we must affirm the Tax Court.

The New York City requirement that police

officers be armed within city limits

presented a problem for appellant simply

because of the location of his home. Had

he lived almost any place else in the New

York City metropolitan area of New York

State he would not have had to travel through

the neighboring state of New Jersey. The

Police Department required that officers

be armed within New York City limits; it

did not require them to be armed otherwise.

Thus, the added expense incurred by appellant

did not further the New York City Police

Deparment's business of preventing crime

within the City itself.

Finally, appellant's argument that he

falls with the ambit of Fausner is fatally

defective. Although concededly he incurred

additional expense, in order to deduct it

he must first show that it was ordinary and

necessary. As noted, the location of one's

home is personal and did not serve to further

16

the business of the taxpayer's employer in

this case.

The judgment is affirmed.

17

FOOTNOTES

1

Patrol Guide Section 105-1, which so provided,

has since been amended so that police officers

are no longer required to carry a firearm

while “off duty.”

2

It is not clear from the stipulated facts

whether the Commissioner concedes that had

appellant actually applied for a New Jersey

“gun permit, such application would have been ~

turned down. Appellant claims that this

was the intent of the language included in

the stipulation. Since the government may

have misleadappellant into believing that

he need not apply for the New Jersey gun

permit, we find it desireable to reslove

whatever ambiguity may exist in apppellant's

favor so as to allow for a determination

of this case. We do not mean to suggest

that the general rule requiring exhaustion

of administrative remedies is to be lessened.

3

A daily round trip was approximately

eighty miles via New York highways with

toll costs of two dollars per day and

took appre~imately seventy-five minutes

18

one way. Were appellant to have driven

through New Jersey his toll costs would have

been onedollar and fifty cents per day, the

distance traveled would have been approximately

fifty miles and travel time approximately

forty-five minutes one way.

4

The Shortline Sus Company provides weekday

departures. from Suffern to New York City

at least as frequently as every fifteen

minutes between 6:00 a.m. and 8:09 a.m.

in the morning. In the evening between

4:00 p.m. and 6:10 p.m. weekday departures

left New York City for Suffern at least

as frequently as every twenty minutes.

Appellant's tour of duty during 1976 con-

sisted of working weekdays from 8:00 a.m.

to 4:00 p.m.

5

Appellant no longer seeks a deduction in

the amount of $2,950. Instead the dispute

concerns only a portion of that sum - the

difference between the cost of driving

through New York and the cost of public

transportation passing through New Jersey -

19

which has not been given a dollar amount in

the record before us.

6

Section 162(a) provides that 4

In General - There shall be allowed

as a deduction all the ordinary and necessary

expenses paid or incurred during the taxable

year in carrying on any trade or business...

I.R.C. Section 162(a) (1976).

7

For discussions on the scope of appellant

review of a Tax Court decision, see

generally, Commissioner v. Idaho Power Co.,

418 U.S. 1 (1974) (Douglas, J., dissenting);

Commissioner v. Duberstein, 363 U.S. 278

(1960); Burton-Sutton Oil Co. v. Commissioner,

328 U.S. 25 (1946) (Prankfurter, J., Concurring);

Commissioner v. Wilcox, 327 U.S. 404 (1946);

John Kelley Co. v. Commissioner, 326 U.S.

521 (1946); Trust of Bingham v. Commissioner,

325 U.S. 365 (1945) (FPrankfurter, J., con-

curring).

8

Section 162(a), see note 6, supra, provides

the general rule on the deductability of

business expenses. The list of specific

20

deductions found in paragraph (a) (1)

through (a) (3) is exemplary only. For

instance (a)(1) deals with salaries and

compensation, while (a) (3) concerns rent

and other payments required for possession

of business property. Paragraph (a) (2)

deals with travel expenses incurred "while

away from home," a phrase which has been

“held to apply only to overnight trips

or to travel requiring sleep or rest.”

Gilberg v. Commissioner, 55 T.C. 611, 614

(1971). See, United States v. Correll, 389

U.S. 299 (1967). Nowhere in the record has

appellant contended that he incurred expenses

“while away from home.” Thus for appellant

to prevail he must establish that he is

covered by the general provisions of section

162 (a).

9

"Except as otherwise expressly provided in

this chapter, no deduction shall be allowed

for personal, living, or family expenses.”

I.R.C. Section 262 (1976).

10

See note 8, supra.

21

1l

The first two prongs which must be satisfied

before a travelling expense deduction may

be taken under section 162(a)(2) are:

(1) -The expense must be a reasonable

and necessary travelling expense, as that

term is generally understood. This includes

such items as transportation getee éné food

and lodging expenses incurred while travelling.

(2) The expense must be incurred “while

away from home." Commissioner v. Flowers,

326 U.S. 465, 470 (1946).

22

#81-4175

McCabe v. C.1I.R.

MESKILL, Circuit Judge (dissenting):

I respectfully dissent.

I cannot agree with the majority's

conclusion that McCabe's additional commuting

costs were entirely a result of his personal

choice of residence. In Fausner v. Commis-

sioner, 413 U.S. 838 (1973) (per curiam),

the Supreme Court disallowed a deduction

for commuting costs where the taxpayer, a

commercial airlines pilot, claimed that his

"automobile expenses were incurred to

transport his flight bag and overnight bag

and thus constituted ordinary and necessary

. business expenses." Id. at 838. Because the

taxpayer would have driven to work via the

same route in any event, the Court found

that no “allocation of costs between

‘personal’ and ‘business' expenses" was

feasible. Id. at 839. The Internal Revenue

Service has construed Fausner:

Rev.

to allow an ordinary and necessary

business expense deduction for only

the portion of the cost of transporting

the work implements by the mode of

transportation used which is in

excess of cost of commuting by the

same mode of transportation without

the work implements. The fact that

a taxpayer might have or would have

used a less expensive mode of trans-

portation if it had not been neces~

sary to carrying the work implements

is immaterial.

Rul. 75-380, 1975-2 C.B. 59, 50.

This case is factually distinguishable

from Fausner. Had McCabe driven to work

without his firearm, he could have travelled

through New Jersey. As a result of his

alleged inability to secure a New Jersey

gun permit, however, McCabe was forced to

take a circuitous route, adding fifty cents

in tolls and fifteen miles to his commute.

Compare Stipulated Facts, Paragraphs 13-14

with Stipulated Facts, Paragraphs 30-31.

Certainly, these additional costs were

caused by his employer's requirement that

he carry his firearm at all times while

within New York City and can be allocated

as “business” expenses under Fausner.

The majority's reasoning, that “the

location of one's home is personal and in

23

24

this case does not serve...to further

the business of the taxpayer's employer[,]”

Maj. Op. at 8, drawn to its logical extreme,

would disallow or render meaningless almost

all Fausner-type deductions. A taxpayer

can almost always reduce or eliminate his

excess commuting costs by living closer to

his work location. The real issue is

whether, given the location of McCabe's

residence and his selection of « reasonable

mode of travel, he incurred additional

“ordinary and necessary" commuting cost

“in the pursuit of the business of the

taxpayer's employer.” Commissioner v.

Flowers, 326 U.S. 465, 473 (1946). To the

extent that McCabe's change in route of

travel was necessary to satisfy his employer's

requirement that he carry his iene while

in New York City, I believe that he is

entitled to a deduction under section 162(a)

of the Internal Revenue Code.

The record does not indicate, however,

whether McCabe ever applied for a New Jersey

gun permit or demonstrated the futility of

such an application. McCabe's inability

25

to obtain a permit is critical to his

argument that his additional commuting

costs are deductible as “ordinary and

necessary" business expenses pursuant to

Section 162(a). The sole factual Stipulation

concerning his attempt to obtain a permit

states:

Generally, New Jersey authorities

issue gun permits only to those

individuals with job requirements

necessitating that they be armed

in that state or to individuals who

can establish other urgent need.

Applications for gun permits are

evaluated on their own merits..

Stipulated Facts, Paragraph 9. I would

therefore remand this case to the Tax

Court for a determination of what efforts,

if any, McCabe made to acquire a permit.

If the Tax Court determined that McCabe

never applied for a permit or that he failed

to demonstrate the futility of an application,

the Court should disallow his deduction

for failure to meet the threshold showing

that the added commuting expenses incurred

were necessary. If the Court were satisfied,

however, that McCabe could not obtain a

permit, it should allow his deduction

27

76 T.C. No. 76

UNITED STATES TAX COURT

DENNIS MCCABE, Petitioner v. COMMISSIONER

OF INTERNAL REVENUE,

Respondent

Docket No. 1536-78 Filed June 3, 1981.

T, a New York City police officer, is

required to carry his revolver at all times

while in New York City. T lives ina

relatively remote suburb of New York west

of the Hudson River and immediately

adjacent to New Jersey. The most convenient

and direct routes to T's post of duty in

New York City require travel through New

Jersey, the statutes of which prohibit T

from carrying his revolver while in that

state. Accordingly, T drives to work by

the way of the more circuitous New York

highways, although he would otherwise use

the more convenient public transportation

through New Jersey and incur less commuting

expenses but for the necessity of carrying

his revolver. T seeksto deduct the

difference between the cost of driving

through New York and thecost of public

28

transportation passing through New Jersey.

Held, Petitioner is entitled to no

deduction for his commuting expenses

because they were not directly connected

with his employer's business, but were

personal expenses incurred as a result

of petitioner's choice of the location

of his residence.

Paul S. Brenner, for the petitioner.

Robert J. Alter, for the respondent.

29

OPINION

RAUM, Judge: The Commissioner determined a

$908 deficiency in petitioner's 1976 income

tax. The only remaining issue is whether

petitioner is entitled to deduct some

portion of his automobile expenses in

transporting himself and his service

revolver to and from his place of employment

as a police officer. The case was submitted

on the basis of a stipulation of facts.

During 1976, and at the time he filed

his petition herein, petitioner resided in

Suffern, New York. Suffern is a relatively

remote suburb west of the Hudson River and

is immediately adjacent to the State of

New Jersey. In 1976, he was employed as

a New York City police officer assigned

exclusively to the 28th Precinct at 2271

Eighth Avenue, New York, New York. Pet-

itioner's tour of duty during 1976 consisted

of working 243 weekdays from 8:00 a.m. until

4:00 p.m. only.

The regulations of the New York

Police Department require police oitficers

30

to be armed at all times when in the

City of New York unless otherwise directed.

However, New Jersey, through which petitioner

would travel if he commuted to work by

driving over the most direct route or

taking a bus, permits officers employed

by governmental agencies outside the

State of New Jersey to carry weapons in

New Jersey only while engaged in official

duties and upon prior notification to

local police authorities. See N.J. Stat.

Ann. sec. 2a:151-43(s) (West 1969) (repealed

1979) (current version at N.J. Stat. Ann.

sec. 2C:39-6(b) (1) (West 1980)). New

York City police officers carrying a

service revolver through New Jersey by

either public or private conveyance would

be in violation of the New Jersey law if

they did not have a New Jersey gun permit.

Generally, New Jersey authorities issue

gun permits only to those person with job

requirements necessitating that they be

armed in that state or to person who can

establish other urgent need. Applications

for gun permits are evaluated on their

own merits.

During 1976, petitioner used his

personal automobile as his exclusive’

means of commuting to and from his post

of duty at the 28th Precinct. Petitioner

did not use his own automobile during his

work day. When petitioner commuted to

his job by automobile, he carried his

service revolver on his person and did

not modify his automobile in any way in

order to carry the revolver. Petitioner

incurred no added expense in the cost of

operating his vehicle by carrying his

revolver above that which he would have

incurred if he had commuted to his job

by automobile without the revolver. In

travelling by automobile to and from the

28th Precinct from his home, petitioner

traveled approximately 40 miles each

way via New York highways. His route

generally took 75 minutes to drive; toll

costs were $2 per day. If petitioner had

driven through New Jersey in commuting

31

to work, his toll costs would have been

$1.50 per day, the distance would have

been approximately 25 miles one-way, and

travel time would have been approximately

45 minutes.

During 1976, a bus service provided

by the Shortline bus company traveled

from Suffern, New York, to the Port

Authority Bus Depot in New York City.

However, this bus traveled through New

Jersey. If petitioner had taken the

bus to New York City, he would have boarded

the bus at a stop located two blocks from

his home in Suffern. Between 6:00 a.m.

and 8:00 a.m., weekday departures from

Suffern for New York City occurred at

least as frequently as every 15 minutes;

in the evening, between 4:00 and 6:00 p.m.,

weekday departures from New York City for

Suffern occurred at least as frequently

as every 20 minutes. Travel time by bus

from petitioner's home to the Port Authority

Bus Terminal was approximately one hour.

The one-way fare between Suffern and the

bus terminal in Manhattan was $2.70;

33

however, a 50-trip bus ticket cost $76.60

from January 1 through October 27, 1976,

and $82.75 for the remainder of 1976.

From the Port Authority Bus Depot,

petitioner would have to have taken an

approximately 15 minute subway ride to

the 28th Precinct. During 1976, petitioner

could have ridden the subway without

charge due to his police officer status.

Petitioner could also have used

public transportation that did not pass

through New Jersey. Petitioner could

have driven 16 miles to Tarrytown, New

York, on the east side of the Hudson River,

and taken the Hudson line of Conrail to

Grand Central Station in New York City.

The drive to Tarrytown would have required

approximately 30 minutes; round trip tolls

between Suffern and Tarrytown would have

been $1.50 per day, and parking at the

Tarrytown train station would have cost

$90 per year. The time from Tarrytown

to Grand Central Station ranged from 38

to 54 minutes, depending upon which train

was utilized. A monthly commuting ticket

od

;

34

cost $58.75. The route that petitioner

actually took in driving his automobile

from Suffern to this post of duty in New

York City passed through Tarrytown.

On his 1976 income tax return,

petitioner claimed $2,950 in automobile

expenses as a deduction on form 2106,

Employees Business Expenses. This

ded'us:tion represented the commuting costs

for 17,600 miles plus bridge and thruway

tolls by virtue of petitioner's use of

an automobile rather than a bus or train

to travel between his home in Suffern,

New York, ard his job in New York City.

The Commissioner disallowed the entire

deduction.

It is well settled that a taxpayer's

cost of conmuting between his residence

and his place of employment is a non-

deductible personal expense. Sections

1.162-2(e) and 1.262-1(b) (5), Income Tax

Regs.; see, e.g., Fausner v. Commissioner,

413 U.S. 838, 839 (1973): Commissioner v.

Flowers,326 U.S. 465, 473 (1946); Donnelly v.

Commissioner, 262 F. 2d 411, 412, (2d Cir.

35

1959); Feistman v. Commissioner, 63 T.C.

129, 134 (1974), appeal dismissed 587 F.

24 941 (9th Cir. 1978); Anderson v.

Commissioner, 60 T.C. 834, 835 (1973).

However, an exception to this rule has

been recognized with respect to employees

who are required by their employer to

transport job related tools to and from

work and thereby incur expenses in addition

to the ordinary commuting costs they

otherwise would incur.

Ie

.

In computing the deduction for auto-

mobile expenses, petitioner determined the

annual mileage driven by multiplying the

80 mile daily trip distance by 220 days.

According to the stipulation, petitioner in

fact worked 243 days in 1976, but he has

presented no claim for an increased deduction.

See Fausner v. commissioner, supra, 413 U.S.

at 839; Kallander v. United States, 526 F.

24 1131, 1136 (Ct. Cl. 1975); Coker v.

Commissioner, 487 F. 2d 593, 594 (2d Cir.

1973), cert. denied 414 U.S. 1130 (1974);

36

Feistman v. Commissioner, supra, 63 T.C.

at 135; Gilberg v. Commissioner, 55 T.C.

611, 618-619 (1971); Hitt v. Commissioner,

55 T.C. 628, 632-633 (1971). If such

additional expenses are incurred, they are

deductible as “ordinary and necessary"

business expenses pursuant to Section 162(a)

I.R.C. 1954.

Petitioner claims that but for the

necessity of carrying his gun, he would have

taken the bus and subway to work, and thereby

avoided the greater expense incurred in

driving to work. Although petitioner's

return claimed a deduction for his entire

isaelideaie incurred in driving to work, he

now claims, in his petition and on brief,

a deduction for only the excess of this

automobile expenses over the costs thar he

would have incurred in commuting by bus

and subway.

The Government contends first that

any add-tional commuting expenses petitioner

ingurred as a result of petitioner's personal

37

choice of the location of his residence,

and did not arise out of his employer's

requirement that he carry his gun while

within New York City. The Government

further disputes petitioner's assertion

that he would have taken public trans-

portation to work but for the necessity

of carrying his gun; it argues that if

petitioner desired to take public trans-

portation to work, he would have driven

to Tarrytown (which was on his actual

route to New York City) and taken Conrail

to Grand Central Station. Finally, relying

on Rev. Rul. 75-380, 1975-2 C.B. 59, 60,

the Government contends that the basic

cost of commuting, whether by automobile

or public transportation, is a nondeductible

personal expense, and that petitioner is

therefore entitled to no deduction because

he incurred no tool-carrying expenses beyond

But note l, supra.

38

the basic cost of commuting to work.

It is stipulated that if petitioner

had been called to testify in this case,

he would have stated that he would have

taken the bus and subway to work were it

not for his having to commute carrying his

service revolver. Because this case was

submitted under Rule 122, we had no oppor-

tunity to observe petitioner's credibility

as a witness. Petitioner's assertion that

he would have preferred to commute by bus

and subway is supported by the facts that

the bus stopped only two blocks from his

residence and that the commuting time by

bus and subway was not substantially

greater than the commuting time driving

over New York highways. We accordingly

fined as a fact that petitioner would have

commuted to work by using the bus and subway

but for the necessity of carrying his service

revolver. To be sure, the Government disputes

petitioner's commitment to public trans-

portation by noting that petitioner could

have taken public transportation by driving

to Tarrytown and boarding a Conrail train.

39

However, this method of cammuting would

have required the use of petitioner's

automobile and would have taken more time

than driving wholly through New York State

or commuting by bus and subway. In the

circumstances, we find credible petitioner's

assertion that he would have taken the bus

and subway to work if he had not been required

to carry his service revolver.

Despite our conclusion that petitioner

would have utilized public transportation to

commute to work but for the necessity of

carrying his service revolver, we find that

petitioner's additional commuting expenses

were not directly connected with the pursuit

of his employer's business, but were

principally the result of his decision to

reside in a comparatively remote suburb

adjacent to New Jersey. Accordingly,

petitioner is entitled to no deduction for

his commuting expenses under section 162(a),

I.R.C. 1954, since such expenses were not

necessary for the conduct of his employer's

business.

40

In order to qualify for a deduction

of transportation expenses under the |

general provisions of Section 162(a), petitioner

must demonstrate that such expenses were

directly connected with the pursuit of his

employer's business and were not commuting

expenses incurred solely for personal

reasons. See Commissioner v. Flowers, supra,

326 U.S. at 470, 472-474; Gilberg v. Commissioner,

Supra, 55 T.C. at 614; Bunevith v. Commissioner,

52 T.C. 837, 841 (1969), affd. 70-1 USTC

par. 9414, 25 AFTR 2d 70-935 (lst Cir. 1970).

cf. Carragan v. Commissioner, 197 F. 2d 246,

249 (2d Cir. 1952). Petitioner has not met

this burden. It is true that Petitioner

would have incurred no additional expenses

but for his employer's requirement that he

carry his service revolver while within

the City of New York. However, this re-

quirement presented difficulties for

petitioner only because he had chosen to

live near New Jersey so that the most direct

routes to his place of employment, either

by automobile or public transportation, re-

41

quired travel through that state. The

New York City Police Department required

only that petitioner be armed when inside

the City. The petitioner's added costs in

meeting this requirement were due to his

choice of a personal residence in Suffern

and New Jersey law which prevented him

from carrying his revolver through that

state. These costs were wholly unnecessary

and inappropriate for the conduct of the

New York Police Department's law enforcement

duties within the City of New York. Accord-

ingly, petitioner's added expenses in

avoiding travel through New Jersey, as well

as his basic commuting costs, are personal

in nature, and no deduction for such

expenses can be allowed. Section 262,

I.R.C. 1954.

We have reached our decision in this

case solely on the basis of the Government's

argument that petitioner's commuting expenses

were wholly personal in nature. We accord-

ingly express no opinion as to whether an

employee's additional commuting costs for

42

utilizing a more expensive mode of trans-

portation than he would otherwise have used

in order to carry job-required tools may

be considered deductible in appropriate

circumstances. See generally Rev. Rul.

75-380, supra, 1975-2 C.B. at 60.

We emphasize that we do not pass

upon the application of the concept

suggested in Fausner v. Commissioner, supra,

413 U.S. at 838 -- i.e., that an allocation

of costs might be appropriate where additional

expenses are incurred for transporting

job-required tools and material to and

from work. That concept is inapplicable

here because petitioner has failed to

satisfy the threshold condition that any

deductible expenses must be incurred in

pursuit of business and not as the result

of personal requirements. This threshold

condition was plainly indicated in Commissioner

v. Flowers, supra, 326 U.S. at 473:

The added costs in issue, moreover,

were as unnecessary and inappropriate

to the development of the railroad's

business as were his personal and

living costs in Jackson. They were

incurred solely as the result of

43

the taxpayer's desire to maintain

a home in Jackson while working in

Mobile* * *. It simply asked him

to be at his principal post in

Mobile as business demanded* * *.

Similarly here, the City of New York

did not require petitioner to travel from

Suffern to his post of duty and to have his

service revolver with him at all times

in New York. It did not require him to

carry that revolver through New Jersey.

It was petitioner's personal choice to

2seside in a place where the most convenient

route to his post of duty was through

New Jersey. This case is quite unlike

those ~ases where a taxpayer is required

to incur additional expenses for trans-

porting job-related tools to work regardless

of where he lives. The possible allowance

of deduction of the extra cost of such

transportation is not a matter that is

in issue or decided herein.

Due to the Government's concession

of another issue,

Decision will be entered under

Rule 155.

Reviewed by the Court.

44

SCOTT, J., concurring: I agree with

the majority that petitioner is not entitled

to any deduction for travel between his

home and place of employment since it

was for personal reasons that he chose

his place of residence. However, I do

not agree with any implication that

might be present in the majority opinion

that under certain circumstances petitioner

would be entitled to a deduction because

of the requirement that he have his

service revolver with him at all times

when he was in New York City.

Accepting the fact as found by the

majority that because of New Jersey law

petitioner could not carry his pistol

through that state,- I do not consider

that this

1

Although I am willing to accept the

conclusion of the trial judge even in a

fully stipulated case such as this, I

have great difficulty in understanding

why petitioner was prohibited by New

Jersey law from carrying a revolver ‘

through New Jersey. The parties stipulated

that "New Jersey permits officers employed

by governmental agencies outside the

State of New Jersey to carry weapons

in New Jersey only while engaged in

official duties and upon prior notification

ed

45

to local police authorities” and "generally,

New Jersey authorities issue gun permits

only to those individuals with job re-

quirements necessitating that they be

armed in that state or to individuals

who can establish other urgent need.

Applications for gun permits are evaluated

on their own merits.” This stipulation

is obviously the stipulation of a legal

conclusion. The parties did not “stipulate

whether in fact petitioner had applied for

a permit and whether the state authorities

had denied the application.

Sec. 2A: 151-43 of the New Jersey

Statutes Annotated as applicable to the

year here involved contains numerous

exceptions to the prohibition against

the possession and carrying of a pistol

without a permit. The section of this

statute to which the parties obviously

had reference in their stipulation is

subsection(s) which provides:

case falls within the "tool" reference made

in Fausner v. Commissioner, 413 U.S. 838

(1973). The Fausner case (at 839) states,

insofar as here pertinent, as follows:

As the Court of Appeals indicated,

Congress has determined thatll taxpayers

shall bear the expense of commuting to and

from work without receiving a deduction

for that expense. We cannot read Section

262 of the Internal Revenue Code as ex-

Cluding such expense from "personal"

expenses because by happenstance the

taxpayer must carry incidentals of his

occupation with him. Additional expenses

may at times be incurred for transporting

job-required tools and material to and

from work. Then an allocation of costs

between “personal” and "business" expenses

may be feasible. But no such allocation

can be made here. [Fn. ref. omitted.]

46

tn my view the reference to "additional

expenses" being incurred for transporting

"job-required tools and material"

Footnote 1--continued

Law enforcement officers employed

by governmental agencies outside of the

State of New Jersey who are engaged in their

official duties provided that they have

first notified the chief law enforcement

officer of the municipality or the county

prosecutor of the county in which they are

engaged or the superintendent.

However, subsection (d) of this same statute

provides an exception to the prohibition

against carrying weapons without a permit

as follows:

The regularly employed members,

including detectives, of the police department

of any county or municipality or of any State,

interstate, municipal or county park police

force or of any county boulevard police

force at all times, while within the State

of New Jersey * * *.

I would conclude from this statute,

and have found nothing in the New Jersey

law to persuade me to the contrary, that

without any necesgity of obtaining a permit

from New Jersey a regularly employed police

officer of New York City, such as petitioner,

would be exempt from the prohibition against

carrying a pistol wathin the State of New

Jersey.

in the Fausner case was to the cost of

transporting the tools where an additional

cost such as excess baggage or trailer

rental was incurred. It does not relate

to requiring a determination of the mode

of transportation a taxpayer contends he

may have used but rather to the mode of

transportation that he actually did use..

47

48

FAY, J., dissenting: I respectfully

dissent from the majority's conclusion that

petitioner's expenses were “whclly personal."

I agree with Judge Sterrett that contained

within petitioner's expenses of travelling

to and from work is a portion in excess of

what petitioner would have otherwise

necessarily incurred in commuting, and that

excess is directly related to a requirement

imposed by petitioner's EE See

Fausner v. Commissioner, 413 U.S. 838, 839

(1973).

The majority opinion expressly de-

clines to “pass upon the applicability of

the concept suggested in Fausner***."

Majority supra at ll. In my view, the

Fausner question should have been addressed

fully, and, furthermore, should have been

resolved in petitioner's a” We have

never, before today, ended our inquiry in

this type of case with the conclusion that

a taxpayer requirement-based excess travel

costs. See, for example, the analysis in

Hitt v. Commissioner, 55 T.C. 628 (1971)

“

49

and in Gilberg v. Commissioner, -55 T.C. 611

(1971).

I base my dissent upon the facts as

found by the majority including their finding

that petitioner could not have obtained a

permit to carry a gun through New Jersey.

2

In fact, the parties briefed this

case almost exclusively on the Fausner

issue. LSA

It is obvious to me that petitioner

incurred excess travel costs and that the

excess was caused by his employer's require-

ment. True, the amount of that excess will

be a function of petitioner's choice of

residence, but that is always the case

when such excess travel costs present them-

selves. For example, if a construction

worker living 30 miles from his jobsite

were required to tow a trailer of tools,

would not his excess be less if he moved

20 miles closer to his jobsite, or completely

eliminated if he moved into a house adjacent

to the jobsite? The majority opinion,

supra at 12, seeks to distinguish the long

50

line of "tool" cases as applying only to

“additional expenses for transporting job-

related tools to work regardless of where

[the taxpayer] lives." However, as my

example above illustrates, the “additional

expense" could be eliminated or greatly

reduced in almost every "tool" case. Thus,

I remain unpersuaded that this case is

eeteiet. Petitioner's "additional

expenses," those over and above his

reasonable commuting expenses, were caused

by his employer's requirement that petitioner

have his gun with him when he entered New York city’.

z

I am also unconvinced by Judge Scott's

concurrence. In this case it is not the

mode of travel but rather the route of travel

which is mandated by the employer's requirement.

If a true excess cost exists, it is irrelevant

whether that excess exists due to mandated

routes of travel or mandated means of travel.

However, I do not necessarily agree with

Judge Sterrett that we look to the taxpayer's

"preferred means of transportation in order

to calculate any excess.

Where he lived does not alter that requirement;

it merely affects the amourtof the excess

which could range from zero, see Coker v.

51

Commissioner, 487 F.2d 593(2d Cir. 1973),

cert. denied 414 U.S. 1130 (1974), on up.

I express no opinion as to the amount

of petitioner's deductible travelling

expenses. Although I would certainly reach

the issue were I writing for the majority,

I see no reason to enter into a laborious

analysis of calculating

4

In my view, petitioner's excess travel

costs were caused by his employer's re-

quirement even though the New Jersey law

also affected petitioner's route of travel.

If it were not for the employer's require-

ment, the New Jersey law on carrying guns

would be irrelevant to petitioner.

Consider the case of a construction

worker who must travel one of two equal

distance roads to his jobsite. He chooses

Road 1 because using Road 2 would necessitate

paying $l/day toll charge. Suppose my

worker's employer imposes a requirement

requiring that worker to carry his tools

to and from work, which, in turn, necessitates

that worker's towing a trailer to and from

work. Pursuant to that requirement and

state law prohibiting trailers on Road l,

petitioner must travel Road 2 and incur the

$l/day toll charge. Would not that $1.00

be deductible? I conclude that it would.

When a combination of an employer requirement

and an outside force causes an employee to

incur expenses greater than his ordinary,

reasonable commuting expenses, the excess

should be deductible by the employee if the

outside force's applicability to the employee

is caused by the employer's requirement.

footnote 4 continued 52

In fact, in almost every tool case it

Will be a combination of factors which lead

to the employee's incurring additional

expenses. For example, if an employer

requires a worker to have tools at the

jobsite but the employer provides no tool

storage place, it is both the employer's

requirement and the worker's desire to

have his tools left unexposed to weather

and thieves that make the worker transport

his tools to and from the jobsite.

the excess amount at this time. It is

clear from the record that no matter what

bases of comparison are used, such as

driving through New York versus driving

through New Jersey or using public trans-

portation through New York versus driving

through New wvaden petitioner did incur

additional costs. Accordingly, I would

hold that petitioner is entitled to some

part of his claimed travel expenses deduction.

5

However, I note that respondent, on

brief, argued that if we held petitioner

incurred deductible travel expenses, the

deductible amount should be limited to

the difference in cost between taking

public transportation through New Jersey

and taking public transportation, as much

as possible, through New York. See also

Rev. Rul. 75-380, 1975-2 C.B. 59, at 60.

y

53

STERRETT, J., dissenting: I respect-

fully dissent from the ultimate conclusion

reached by the majority.

In so ‘doing I proceed from the same

basic premise as did the majority: namely,

"a taxpayer's cost of commuting between

his residence and his place of employment

is « »ndeductible personal expense."

While the Supreme Court in Fausner v.

Commissioner, 413 U.S. 838, 839 (1973),

emphasized that hornbook rule of tax law,

it added the following postscript:

Additional expenses may at times be

incurred for transporting job-required

tools and material to and from work.

Then an allocation of costs between

"personal" and "business" expenses

may be feasible. But no such allo-

cation can be made here.

The facts in the instant case are a perfect

illustration of when such an allocation can,

and should, be made.

The circumstances are ideal because

a revolver is to a policeman what a hammer

is to a carpenter. A carpenter is required

by his employer to bring his toolbox to

work at his own expense. A policeman is

54

required by the New York City Police

Department to have his revolver on his

person at all times while in the City.

In each case the requirement is imposed

by the employer as a condition of employ-

ment. There is no personal element to

the requirement; it is purely job-related.

Once the business necessity of an

employee taking something with him to work

is established, then any “additional expense"

(over his preferred means of transportation)

incurred solely by reason of that necessity

should, under the Supreme Court's holding

in Fausner, be deductible.

It is, of course, the taxpayer's burden

to show the increment in the cost of commuting

to work attributable to the job-related

requirement. The precise nature of the

added expenditure is of no moment as long

as the expenditure can be characterized

as “ordinary and necessary." Thus, it

matters not whether the incremental cost

is attributable to buying a trailer for the

car to carry the tools or is attributable

to taking a different route to work because

55

of circumstances beyond the taxpayer's control,

Here, the taxpayer was prevented from taking

the most direct and least expensive means

of commuting to work by reason of New

Jersey re I can envision a similar

circumstance where a truck, carrying

inflammable material, is limited by state

law to the use of certain specific roads,

thereby incurring additional expense. I

would hold, therefore, that the peti-

tioner incurred additional expense

1

We assume that the taxpayer could not

get a permit to carry his revolver while in

New Jersey.

in getting to work due to a condition of

his employment rather than his choice of

where to live.

No doubt the question of determining

the exact amount of the incremental job-

related cost could be troublesome in many

cases. See Coker v. Commissioner, 487 F.2d

593 (2d Cir. 1973). Here that presents no

problem since the majority has found as a

fact “that petitioner would have commuted

to work by using the bus and subway but

for the necessity o -arrying his service

revolver." It appears that in this case

the cost of using the bus and subway to

and from work would have approximated

$3.20 per day. I would allow petitioner

to deduct any expense in excess of that

amount incurred in commuting to work.

Section 162, I.R.C. 1954.

WILES and WILBUR, JJ., agree with this

dissenting opinion.

REVENUE RULING 75-380 37

The Internal Revenue Service has re-

considered Rev. Rul. 56-25, 1956-1 C.B. 152,

and Rev. Rul. 63-100, 1963-1 C.B. 34, in

view of the decision by the Supreme Court

of the United States in Fausner v. Commissioner,

413 U.S. 838 (1973), 1974-2 C.B. 42, affirming

per curiam the decision of the Court of Appeals

for the Fifth Circuit, 472 F. 2d 561 (1973),

which in turn affirmed per curiam the decision

of the United States Tax Court, 30 CCE Tax

Ct. Mem. 1187 (1971).

Rev Rul. 56-25 holds that expenses in-

curred by an employee in using his automobile

for commuting between his place of abode

and his principal or regular place of

work represents nondeductible commuting

expenses within the scope of section 262

of the Internal Revenue Code of 1954, not-

withstanding the fact that the automobile

is also used to transport tools used by

the employee in his work. In so holding,

Rev. Rul. 56-25 states that the expenses

incurred in going to and from work were not

58

increased by reason of the fact that the

tools used by the employee in his work were

also transported in the automobile.

Rev. Rul.56-25 was modified by Rev.

Rul. 63-100 to remove the implication

that such transportation expenses would

not be deductible even if the employee would

not have used his automobile on such trips

"but for" the necessity of taking his

tools with him. Rev. Rul. 63-100 holds that

where it is necessary for a musician to

use his automobile to transport his musical

instruments between his residence and his

place of work because they are too bulky

to be carried otherwise, and he would not

use his automobile on such trips "except

for" that reason, the entire amount of his

transportation expenses are deductible under

Section 162 of the Code. The Revenue Ruling

states that such expenses are deductible

ordinary and necessary business expenses

because they are occasioned primarily by

the necessity for transporting bulky musical

instruments, and that whether transportation

59

expenses are incurred primarily for business

or personal reasons is a question of fact

to be determined in each case.

In Fausner the taxpayer, an airline

pilot, who regularly traveled by private

automobile from home to his place of

employment and back again, sought to deduct

the entire cost of his commuting expenses

under Section 162(a) of the Code on the

theory that his automobile expenses were

incurred to transport his flight bag and

overnight bag and thus constitute ordinary

and necessary business expenses. It was

not disputed that the taxpayer would have

commuted by private automobile regardless

of whether he had to transport his two bags.

The Supreme Court of the United States, re-

ferring to Section 262, held that the tax-

payer was not entitled to any deduction with

respect to the cost of transporting his

flight and overnight bags in his automobile

while commuting to and from his work. In

addition the Court, citing Rev. Rul. 63-100,

stated that additional expenses may at times

be incurred for transporting job-required

60

tools and material to and from work and

then an allocation of costs between “personal”

and “business” expenses may be feasible.

In view of Fausner questions have

arisen as to (1) whether the “primary

purpose" or “but for” test of Rev. Rul.

63-100 is still valid, and (2) what is the

amount of a taxpayer's deduction, if any,

for transporting costs incurred in carrying

job-required tools and material between

the taxpayer's residence and place of work

where the taxpayer (a) would have used the

same mode of commuting irrespective of

carrying such implements or (b) would not

have used the same mode of commuting

irrespective of commuting "but for”

carrying such implements.

With respect to question (1), the

Tax Court, the Fifth Circuit, and the

Supreme Court in the Fausner case have

all used an “additional expense” approach

in determining whether the costs incurred

by a taxpayer in transporting work implements

to and from work are deductible. Thus, where

61

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 taxpayer 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.

In determining the deductibility of

expenses in Rev. Rul. 63-100, and Rev. Rul.

56-25, as modified by Rev. Rul. 63-100, the

sole focus is placed on the fact that the

taxpayer would not have used the automobile

for commuting purposes “but for” the need

to take the tools. Those Revenue Rulings

do not focusonwhether the taxpayer incurred

additional expenses for tool-carrying. The

“additional expense" approach to deductibility

of toc‘-carrying expenses referred to by the

Supreme Court in Fausner focuses solely upon

whether a taxpayer incurs expenses for

4 . = Ss

transporting job-required tools and material

to and from work in addition to the non-

deductible personal expense of commuting

to and from such work.

Under the Supreme Court's “additional

expenses" approach in Fausner, even though

a taxpayer satisfies the “but for” test in

Rev. Rul 63-100, the taxpayer is still not

entitled to a transportation expense

deduction unless it can be established that

additional expenses were incurred because

of the necessity of transporting work im-

plements to and from work and the amount of

such additional expenses can be accurately

determined. On the other hand, even though

a taxpayer is unable to satisfy the "but for"

test in Rev. Rul. 63-100, a transportation

expense deduction may still be allowable if

the taxpayer is able to establish that

such accurately determinable additional

expenses were incurred because of the

necessity of transporting work implements

to and from work. Accordingly, the “but

for" test, set forth in Rev. Rul. 63-100,

62

63

is no longer valid.

With respect to question (2) copeeding

the amount of a taxpayer's deduction, the

principles set forth above apply in that

the deduction does not depend om determining

whether the mode of transportatiom that

the taxpayer used in carrying work implements

to and from work was different than the mode

of transporation the taxpayer would have

used to commute without such implements,

but is dependent on the taxpayer's establishing

that the expense in transporting the work

implements to and from work were incurred

in addition to otherwise nomdeductible

personal commuting expenses.

The Court in Fausmer states that

allocation of costs between perscmal and

bwsiness expenses may be feasible in an

“additional expense” situation. Therefore,

the “alli-or-mothing” positign regarding

the amount of 4 taxpwyer’s deduction in

Rev. Rul. 63-100 is mot within the plain

meaning of the term “allocation” used by

the Court in Fausner. Absent a showing of

additional expenses -acurred for transporting

64

work implements to and from work, a tax-

* payer's carrying of such items will not alter

the nondeductibility of transporting expenses

to and from work.

Therefore, in sitwations where a

taxpayer cam establish that additional

expenses were incurred for transporting

work implements to and from work, a reasonalbe

and feasible method of allocation within

the scope of the Supreme Court's opinion

in Pausner would be to allow an erdinary

and necessary busimess expense deduction

for only the portion of the cost of trans-

porting the work implements by the mode of

transporting used which is in excess of

cost of commuting by the same mode of

transportation without the work implements.

The fact that a taxpayer might have or

would have used a less expensive mode of

transportation if it had not been necessary

to carrying the work implements is immaterial.

The following example illustrates the

“feasible” allocation approach. A taxpayer

4 commuted to and from work by public trans-

portation before the taxpayer had to carry

Be.

— el a, bs 7 — ~~ - =

65

necessary work implements. It cost $2 per

day to commute to and from work. When it

became necessary to carry the implements

to and from work, it cost $3 per day to

drive a car and an additional $5 per day

to rent a trailer in which the implements

were carried. The allowable deduction

would be the $5 per day additional expense

that the taxpayer incurred in renting the

trailer to carry the work implements.

Rev. Rul. 56-25 is superseded and Rev.

Rul. 63-100 is revoked. Pursuant to the

authority contained in Section 7805(b) of

the Code, the conclusion of this Revenue

Ruling will not be applied to taxpayers who

gualified under Rev. Rul. 63-100 for the

deduction of transportation expenses paid

or incurred prior to January l, 1976.

66

REVENUE RULING 63-100

Where it is necessary for a musician

to use his automobile to transport his

musical instruments between his residence

and his place of work because they are too

bulky to be carried otherwise, and he

would not use his autcm®bile on such trips

except for that reason, his transportation

expenses are deductible under Section 162

of the Internal Revenue Code of 1954.

Such transportation expenses are

ordinary and necessary expenses paid or

incurred in carrying on his trade or business

because they are occasioned primarily by

the necessity for transporting bulky

musical instruments even if such expenses

would otherwise be nondeductible commuting

expenses.

Whether transportation expenses are

incurred primarily for business or personal

reasons ic a question of fact to be determined

in each case.

Revenue Ruling 56-25, C.B. 1956-1, 152,

states that expenses incurred by an employee

in using his automobile for commuting between 7

67

his place of abode and his principal or

regular place of work repiesent nondeductible

personal expenses notwithstanding the fact

that the automobile is also used to trans-

port tools used by the employee in his

work. That ruling is hereby modified to

remove the implication that such trans-

portation expenses would not be deductible

even if the employee would not have used

his automobile on such trips but for the

necessity of taking his tools with him.

- ae i ON Be