Bruce Cornwall and Louise B. Stratton v. Commissioner Internal Revenue Service

448 F.2d 1030 Bruce Cornwall and Louise B. STRATTON, Plaintiffs-Appellants, v. COMMISSIONER INTERNAL REVENUE SERVICE, Defendant-Appellee. No. 24808. United States Court of Appeals, Ninth Circuit. September 1, 1971. Clay G. Diamos (argued), Tucson, Ariz., for appellants. Bennet Hollander (argued), Dept. of Justice; K. Martin Worthy, Chief Counsel, Internal Rev. Service; Johnnie M. Walters, Asst. Atty. Gen., Tax Division, Washington, D. C., for appellee. Before BARNES, BROWNING and TRASK, Circuit Judges. TRASK, Circuit Judge: 1 This is an appeal from a determination by the Tax Court upholding the Commissioner's assessment of income tax deficiencies against taxpayers (husband and wife) for the years 1962 and 1963 in the amounts of $561.72 and $415.00, respectively. The Tax Court's opinion is reported at 52 T.C. 378 (1969). This court has jurisdiction of the appeal under 26 U.S.C. § 7482 . 2 Taxpayer Bruce Cornwall Stratton is a foreign service officer for the Department of State. At the time pertinent herein, he was assigned to a permanent duty station in Karachi, Pakistan. In the fall of 1962, he and his family were authorized to travel at government expense to the United…

This is an appeal from a determination by the Tax Court upholding the Commissioner’s assessment of income tax deficiencies against taxpayers (husband and wife) for the years 1962 and 1963 in the amounts of $561.72 and $415.00, respectively. The Tax Court’s opinion is reported at 52 T.C. 378 (1969). This court has jurisdiction of the appeal under 26 U.S.C. § 7482 .

Taxpayer Bruce Cornwall Stratton is a foreign service officer for the Department of State. At the time pertinent herein, he was assigned to a permanent duty station in Karachi, Pakistan. In the fall of 1962, he and his family were authorized to travel at government ex *1031 pense to the United States so that he could have consultation with the Department in Washington, D. C., and then avail himself of leave time. After arrival and consultation, taxpayer went on leave for several months. 1 He was on “home leave” 2 for a portion of this period and on annual leave for the remainder. While on leave, taxpayer and his family traveled around the United States.

On his federal income tax returns for 1962 and 1963, taxpayer claimed, pursuant to § 162(a), Int.Rev.Code of 1954, deductions for the unreimbursed expenditures he…

(dissenting) :

I would affirm the Tax Court on the basis of its determination, 52 T.C. 378 (1969), that the primary purpose of Mr. Stratton’s “home leave” was to provide him with a vacation. The Tax Court properly relied upon Rudolph v. United States, 291 F.2d 841 (5th Cir. 1961), cert. dismissed, 370 U.S. 269 , 82 S.Ct. 1277 , 8 L.Ed.2d 484 (1962), in dismissing petitioners’ claim. See also Patterson v. Thomas, 289 F.2d 108 (5th Cir. 1961).

*1035 The compulsory nature of “home leave” is only one factor in determining whether Mr. Stratton’s traveling expenses while on such leave were “in the pursuit of a trade or business.” All the circumstances of each case are to be considered.

For example Treas.Reg., § 1.162-2(b) (2) (1958), provides:

As the Tax Court noted, it is conceded that during “home leave” Mr. Stratton “was free to travel where he chose and to do as he pleased; he was not subject to control by his employer.” It is uncontroverted that while on “home leave” Mr. Stratton performed no official acts in his capacity as a State Department foreign service officer. Mr.-Stratton could not remember specifically what he did during his “home leave.” He testified, however, that…