COMMISSIONER v. STIDGER
Legal provision: Internal Revenue Code
Argument of Rogovin
Chief Justice Earl Warren: Commissioner of Internal Revenue versus Howe A. Stidger et ux.
Mr. Rogovin: Mr. Chief Justice, Associate Justices.
This case presents the issue whether amounts expended for meals by respondent, a marine officer serving overseas under circumstances where his family could not accompany him constitute a deductible trade or business expense under Section 162 (a) (2) of the Code which in pertinent part provides up the “traveling expenses” including the entire amount for meals and lodging while away from home in the pursuit of a trade or business would be deductible or whether such expenditures are nondeductible items prohibited by Section 262's warrant that except as otherwise provided in the Chapter no deduction shall be allowed for personal, living or family expenses.
In 1957, the marine respondent, a career marine officer was stationed at El Toro, California.
During that year, he had received permanent duty orders to the Fleet Marine Force Pacific located at Iwakuni, Japan.
A Captain Stidger had been in El Toro, California for some two and a half years prior to the receipt of his change of duty orders.
Prior to that, he had been in Albuquerque permanently stationed with the Marine Corps.
While living at El Toro, he lived with his family in an adjoining town of Santa Ana.
On October 1st, 1957 when his squadron was transferred to Iwakuni, Japan, Captain Stidger began a 15-month tour overseas.
During this period of time, his family remained in Santa Ana, California because of a marine order that precluded dependence from joining their servicemen husband and fathers when they were stationed with the Fleet Marine Force Pacific which was the organization that the squadron was assigned to, so that during this period of time, the family continued to live at Santa Ana, California.
In December of 1958, the respondent had completed his overseas tour and was assigned to the Marine Air Station at Cherry Point, North Carolina.
Justice Potter Stewart: This -- he was -- he wasn't assigned to a ship when he was overseas, was he?
Mr. Rogovin: No sir.
He is --
Justice Potter Stewart: He's not on a carrier.
He was at a -- some sort of a --
Mr. Rogovin: A land base.
Justice Potter Stewart: -- naval base, naval aviation land base or what?
Mr. Rogovin: Yes sir, a marine air base.
Justice Potter Stewart: Marine air station?
Mr. Rogovin: Yes sir.
Justice Abe Fortas: Mr. Rogovin, in your statement, you said he was permanently assigned to -- or something to that effect, assigned in a permanent station in the Pacific.
What's the basis of the word permanent?
Mr. Rogovin: This is a word of art --
Justice Abe Fortas: Is it in the record?
Mr. Rogovin: -- Justice Fortas.
I believe there were permanent duty station orders.
I believe that is in the record.
Justice Abe Fortas: And this was officially designated as a permanent duty station?
Mr. Rogovin: The actual orders are not part of the record.
And the distinction I draw with the language of permanence is a term of art of the Armed Forces to distinguish those transfers which are of temporary duty as opposed to a shift from one duty station to another duty station.
Justice Abe Fortas: And this may -- it seems to me that it may have some significance with respect to the outcome of this case.
And as a -- I'd like to know whether the -- I don't want you to take your time now --
Mr. Rogovin: Yes sir.
Justice Abe Fortas: -- but perhaps at some point, you can tell me whether there is anything in this record that characterizes that duty station as permanent.
Mr. Rogovin: Yes sir.
During the period of 15 months, the respondent was stationed at Iwakuni.
He incurred certain expenditures which are the issue before this Court.
It amounted to some $650 which he paid to the officer's mess for his food.
While stationed at Iwakuni, the respondent paid for his own meals.
He was however furnished three-quarters like all commissioned officers serving in -- with the fleet marine force.
And like all commissioned officers in the military, he had to pay for his own meals.
Now, during this period of service, there were two allowances which are quite pertinent to the case.
The respondent received a family quarters allowance and he continued to receive to this family quarters allowance while he was overseas.
This amounted to $102.50 a month, tax free and was intended to provide housing for dependents.
He also received a subsistence allowance of $42.50 a month, similarly tax free.
This was his food allowance.
Justice Potter Stewart: Now, if he had not been overseas, would he have had this subsistence allowance?
Mr. Rogovin: Yes sir, both allowances were obtainable under any circumstance of service, whether it be in the United States or the (Voice Overlap) --
Justice Potter Stewart: For any married officer, is that it?
Mr. Rogovin: The dependent -- the quarters allowance depends on your marital status and your rank.
Justice Potter Stewart: Right, but you get a quarters allowance --
Mr. Rogovin: Yes sir.
Justice Potter Stewart: -- if you're married?
Mr. Rogovin: That's -- yes sir.
Justice Potter Stewart: The amount of it depends upon your rank and your -- and what?
How many children you have?
Mr. Rogovin: I believe it's just whether they are married or --
Justice Potter Stewart: Or not?
Mr. Rogovin: Yes sir.
Justice Potter Stewart: An unmarried officer doesn't get a quarters allowance, does he generally?
Mr. Rogovin: Generally, he does not but he can under certain circumstances --
Justice Potter Stewart: Yes.
Mr. Rogovin: -- as I understand it.
Justice Potter Stewart: But area officer gets the subsistence allowance?
Mr. Rogovin: Yes sir.
It's the same for all officers.
Justice Potter Stewart: Wherever he is?
Mr. Rogovin: Yes sir.
The respondent claimed the $650 that was paid for his food at the officers mess at Iwakuni as a deduction under 162 (a) (2) of the Revenue Code.
On examination, the Commissioner disallowed this amount and the respondent petitioned the Tax Court for redetermination.
The Tax Court upheld the Commissioner and found that the respondent was not traveling away from home as the term -- the word home is used in Section 162 that the respondent's home for the purposes of the travel expense deduction was at his place of employment which was Iwakuni, Japan during this period of time.
And further that the respondent stay at Iwakuni was not temporary so as to allow qualification under an exception for temporary travel recognized by the Revenue Service and by the Tax Court.
The Court of Appeals with one judge dissenting reversed and held that the respondent's home was where his family resided, Santa Ana, California.
Thus while Iwakuni was where he was employed, where he was working, in effect, the Ninth Circuit's opinion to the effect that the term home is to be used in its common and usual sense of definition, and that home would be where his family resided at Santa Ana.
Now, the interplay of Section 162 (a) (2) giving this limited deduction and Section 262 which sets out the general prohibition against family and living expenses was before this Court some 20 years ago in the Flowers case.
That time, this Court granted certiorari because of a conflict between the Fifth and the Fourth Circuit as to the meaning and the definition of the term “home”.
Just as now, the Ninth Circuit using home in its ordinary and usual sense, referring to residents, so 20 years ago, the Fifth Circuit had used that same definition in the Flowers Case.
And in Flowers, the three conditions that were outlined by this Court as being prerequisites that must be met before the deduction could be taken were that the expense be a reasonable and necessary traveling expense that the expense be incurred while away from home, that they must be incurred in the pursuit of business.
Now without finding it necessary to resolve the conflict as to the definition of home, this Court found that the expenses from traveling from Jackson, Mississippi to Mobile, Alabama where the taxpayer in Flowers was employed were not incurred in a pursuit of business.
As to what triggers the deduction, the Court stated that a travel expense deduction could arise only when the employer's business forced the taxpayer to travel and to live temporarily at some place other than Mobile, the facts of the Flowers case.
While this Court has not defined the term “home”, the Treasury and the majority of the appellate courts have for many years treated home to mean the taxpayers' principal place of business or employment.
The Ninth Circuit says to the contrary, that home in this statute must be defined in its ordinary and usual sense.
I submit that dictionary definitions will give no extraordinary insight into this issue.
While we are faced with defining home in a specific context of a revenue statute, affording a tax deduction against earned income.
And in the development of the meaning for the word “home”, I submit that it cannot be done in isolation but rather it must give purpose to the provision of 162 (a) (2) without ignoring the prohibition that personal living and family expenses are generally not to be deducted.
In accommodation of these two competing statutory concepts is what is at issue today.
For example, my residence is in Annandale, Virginia.
I work at the Department of Justice's Tenth in Constitution in the District.
Now, if we were to use “home” in the ordinary and usual sentence, I would be encouraged to deduct the travel expenses coming to and from work because they're incurred while away from home, my residence, in the pursuit of a trade or business.
But clearly, this is a commutation expense that I incur.
And the regulations for many years have said that this is a prohibited deduction.
Furthermore, this Court in the Flowers case gave these same regulations, the force in effect of law.
So clearly from the very outset, the word “home” has a tax meaning.
I submit that is in the statute, it is a descriptor.
A place from which when you travel on the pursuit of your trade or business, certain tax benefits would flow.
Now, the legislative history does not shed much light on the definition of home.
But we do have a 45-year consistent Internal Revenue Service interpretation of the word, that taxpayers generally are entitled to travel expense deductions only when they are away from their regular place of employment.
I submit that this definition strikes the necessary balance between these two Sections.
And it -- when the taxpayer is away from his regular place of business, this triggers the applicability of Section 162.
It allows the traveling expense to be brought about by the business exigencies of the taxpayer whether they'd be in the pursuit of this trade or that of his employers.
And it also rules out the deductibility of the personal or family living expenses which are not to be born by the public fisk as demonstrated by Section 262.
The Treasury's view provides an administrable rule that fits into this fabric of the law and it has been consistently interpreted since 1921.
Section 162 (a) (2) was intended to ameliorate financial hardship to taxpayers who incur un-reimbursed additional living expenses when they're traveling away from their regular place of employment in pursuit of business, in pursuit of trade or business.
It's administered so as to put this taxpayer on a parity with the man who stays at home.
And it strikes this balance to provide this limited exception to a rule against the deductibility of living expenses.
Now, the Ninth Circuit's rule would allow deductions for living expenses while away from the residence on business with this caveat, unless it was reasonable to expect the taxpayer to move to a place -- to his place of employment.
This I submit is a very subjective qualification and it raises a number of questions, was it reasonable to move?
Well, this could be a question of judgment values.
Was the housing in the new city adequate?
Was the climate such that it would not be deleterious to the family?
Or was the schooling such that it could equate with the school system from whence the taxpayers to move?
None of these judgment values are pertinent to attacks on income or the expenses to be attributed to its earning.
They're extremely personal in nature.
And I believe the Ninth Circuit's rule would tend to reject the Flowers opinion of this Court, where the Court said, “Business trips are to be identified in relation to business demands and the travelers business headquarters, the exigencies of business rather than the personal convenience and necessity of the traveler must be a -- must be motivating factor".
If the taxpayer in hypothetical took the position that he could contract away his -- bringing his family, the example that comes to mind is a taxpayer in Los Angeles who was an engineer.
And he agrees in contractual dealings with a -- in Alaska construction company that he'll go up there for five years.
And furthermore, they want as a condition of employment that he leaves his family in Los Angeles.
And to ensure that he stays for five years, they worked out an escrow arrangement with respect to his salary, to keep him there for that time.
Well, under these circumstances, the Ninth Circuit's rule, I would assume would say that it was not reasonable for him to bring his family.
It wasn't reasonable because he couldn't do it.
It was an impossibility by way of contract.
Therefore, his travel at -- which was in the pursuit of business, would under those circumstances I would assume be deductible.
He would have the living expenses of his family in Los Angeles and a separate set of living expenses while on Alaska.
I believe that this is his personal choice.
And that's the way that my hypothetical taxpayer wished to live.
And that it's no different than the Flowers case.
We submit that this is the applicability of the rule.
You look to the usual place of employment.
And that you cannot take into consideration that the host of judgment values of a personal nature which may make a man bring his family across and not to bring his family to his place of employment.
Justice John M. Harlan: Has the Revenue attempted to get legislation from Congress to -- particularly in the context of the -- has numbers of people who worked overseas, now straighten out this technical ambiguity if I may say so.
Mr. Rogovin: I suggest -- however, in 1963, the Treasury requested some clarifying legislation which that was not enacted.
Critical to the Ninth Circuit's viewing of this case was their question of whether the temporary verse is indefinite exception would apply to this case and they were quite critical of such an exception.
They considered a more flexible test and their flex -- more flexible test would be if the taxpayer changes his -- he would have to change his tax home if there is a reasonable probability known to him that he may be employed for a long period of time at his new station.
Well, this rule, I submit, doesn't square with the effort to equate home with residence.
The Ninth Circuit uses a concept of a tax home and under certain circumstances they would say that the place of employment actually dictates whether travel expense deductions could be claimed.
The problem however of the temporary travel and I believe we must acknowledge that 15 months is not a period of time in which you would consider extremely permanent at that date.
But we contend that the question of the length of time that the respondent was away is not a relevant factor in determining this case.
Neither the length of time nor his intent become relevant because when he left Santa Ana, California, he cut all of his business ties with that base.
And he was now stationed at Iwakuni, Japan.
He had no business purpose to be away from Santa Ana.
He was moved by the Marine Corp for a 15-month period to Iwakuni.
And therefore, there is complete cleavage just as there was a cleavage when he moved from Albuquerque to Santa Ana and from Santa Ana to Iwakuni.
There was the same cleavage when he left Japan and was transferred to Cherry Point, North Carolina.
And in each one of these moves dictated by his employer, he terminated his business contacts with the community in which he was living.
The military officer's usual place of work is his permanent duty station.
There is a place where he is assigned by the military and it's inherent in military life.
The professional soldier's life is regimented to a degree unparalleled in civilian life.
We certainly recognized the many military posts that are throughout this world.
And the frequency of transfer from one post to another is a constant factor in military life.
The permanent duty station is not only clearly the place of employment of the military officer, but such a station has many of the attributes of a resident community as well.
Under those circumstances where the family or dependents are allowed to travel with the military man, base housing or quarters are provided.
Many of these stations or camps or bases have developed into self-contained communities where there are schools and churches and commissaries, PXs, dispensaries, clubs and post theaters.
And these attributes, plus the system of tax free allowances makes the frequency of change of duty stations less burdensome.
So it is to give military officers who have a permanent duty station, a deduction under Section 162 (a) (2) for traveling expenses when they are away from where their family resides would be -- I submit it an unwarranted tax windfall.
And that conflicts with the purposes of Section 162 (a) (2) and Section 262 which in combination forbid the deduction of a normal living expense.
We respectfully submit that the judgment of the Court of Appeals should be reversed.
Justice Abe Fortas: Mr. Rogovin, I wonder if there really is much to be said here in terms of equities or tax considerations of any substantial nature.
Suppose this officer had been sent from Iwakuni or whatever it is to somewhere else for 12 months, what would -- how -- what would you look to find out whether where his tax home was?
Mr. Rogovin: It's by --
Justice Abe Fortas: Suppose he arrived in Iwakuni, carrying these orders then they told him to go somewhere else, to go to Korea or somewhere else, now what are the factors to -- that you think are permissible for the Commission to look to,to determine what is his “tax home" curious concept itself?
Mr. Rogovin: Justice Fortas, I believe that there are a number of circumstances -- categories.
And here we have -- with respect to people finding this deduction the vast bulk of the public involved in this travel away from home deduction are people who lived in the same community they worked in.
Now, we're dealing with a --
Justice Abe Fortas: (Inaudible)
Mr. Rogovin: -- a separate group, not of the military.
But it need not be just in military.
You can envision the man working for a hotel chain and they moved him from city to city to manage their hotels.
Under these circumstances I believe that it's quite persuasive to view the employer's intent especially when you have a career employee involved.
And if the employer believes that it's for the business -- the best interest of the business to move a particular employee from city A to city B, from station A to station B, and this is a permanent move on the part of the employer.
I think this is a very persuasive factor to consider.
Justice Abe Fortas: Well, I'm still not satisfied this was a permanent move.
The Tax Court found that his stay there in Iwakuni was indefinite, indeterminate or permanent and not temporary.
That's on page 53.
I don't know whether you've got anything else on that.
But in any event, what -- suppose he were move from Iwakuni to somewhere else in 12 months?
Mr. Rogovin: It's our understanding from discussions with the military that movements --change of duty that the ex -- where the period of time will exceed, I think five or six months will be considered to be a permanent move on the part of the military.
And certain advantages flow from orders that are cut in that nature.
When a man is moved from one military base to another on a permanent move, he receives dislocation allowances, he receives per diem in travel, he receives an expense for his family as well, and his dependents as well as his own travel.
On the other hand, when a man is given temporary duty from one base where he works and is sent somewhere else for a period of time, he receives per diem but he cannot move his family.
In this case, Captain Stidger on five occasions was on temporary duty from Iwakuni.
He went out and was gone a period of time 17 and 20 minute -- 20 days and would return.
And as to these movements, we would consider that this type of travel is the type covered by Section 162 (a) (2).
Chief Justice Earl Warren: Are naval officers treated the same way when they go to sea?
Mr. Rogovin: The Service had a ruling out, Chief Justice, dealing with naval officers.
And it was general in its factual pattern that a naval officer who is aboard ship would be put in the position of being away from home because his home port was considered his usual place of employment.
In further pursuing and discussing this with the service, the basic premise there was that that naval officer was comparable to the trainmen or the airplane pilot or the truck drivers who would have a terminal point allowed for relatively short period of time and return.
Under those circumstances, the ruling would prevail.
The service is now reconsidering whether there is a broad or factual pattern covered by service aboard ship than the premise upon which they based the ruling.
Chief Justice Earl Warren: Is that ruling quite realistic as compared to this?
Mr. Rogovin: To the extent that a naval officer is assigned a ship and the -- I think quickly of a relatively small ship on the West Coast that may go out for a couple of days, maybe out for a couple of weeks.
But the home port is the usual place of employment for the purposes of determining whether he is on travel status.
And when he is afloat, when a ship is out to sea, then he would be in a travel position.
This is like the commercial fisherman who was out for three or four weeks at a time but returns to his home port that being his usual place for employment.
Chief Justice Earl Warren: But in the navy, do they not have regular periods where they're in port with home and then periods where they must go to sea?
Mr. Rogovin: Yes sir.
Chief Justice Earl Warren: I've never been on the navy.
I don't know about that.
But I've heard you said that -- I heard them say that while on such and such a date, I'm going to have to go on sea duty for a couple of years.
Now, does that -- does the regulation say that they're away for that length of time, that they're entitled to their --
Mr. Rogovin: It could be --
Chief Justice Earl Warren: (Voice Overlap) all the time?
Mr. Rogovin: Yes sir, it could be so interpreted and the service has indicated that it is going to reexamine --
Chief Justice Earl Warren: I know, but if (Voice Overlap) --
Mr. Rogovin: -- that matter situation.
Chief Justice Earl Warren: -- maybe going to reexamine, but is that consist.
Is that the regulation consistent with what the regulation we're dealing with here?
Mr. Rogovin: I am not at all sure that it would be construed as consistent as to those cases where a man is gone for two years at sea duty.
Chief Justice Earl Warren: Well, is that an abnormal thing or is that a --
Mr. Rogovin: That's --
Chief Justice Earl Warren: -- normal thing in the navy?
Mr. Rogovin: I - I could not say.
I don't believe that two years isn't a normal thing to --
Chief Justice Earl Warren: Well, I don't know what --
Mr. Rogovin: -- for a period of time.
Chief Justice Earl Warren: -- what the length of time is.
You said it was 15 months?
Mr. Rogovin: I don't believe Justice Warren that the man would be at sea for 15 consecutive months.
I believe it would -- as I understand it'd be perhaps no more than six or eight months, and then they would come back to port.
Chief Justice Earl Warren: With six or eight months, he would get his meals?
Mr. Rogovin: Yes sir.
They would be able to deduct them.
Chief Justice Earl Warren: Why the -- why is that distinction made?
Mr. Rogovin: Oh, I believe it was made initially in some years back because the consideration was that -- the ships were gone for a relatively short period of time, and did not consider the potential of an atomic submarine that could remain out in the Pacific for a great length of time, over a year perhaps.
And this is what is being reconsidered.
Chief Justice Earl Warren: Take the naval officers who go on extended duty over in Asia now, in Vietnam, have they got their meals?
Mr. Rogovin: Yes sir, they are able to deduct their meals.
Chief Justice Earl Warren: Then you distinguish that from this case?
Mr. Rogovin: Because the premise of the naval officer's deduction is that his home port is his usual place of employment.
This premise I believe is questionable on the factual matter when you deal with an officer who was aboard for an extended period of time.
Chief Justice Earl Warren: How long was that been in existence?
Mr. Rogovin: That ruling?
Chief Justice Earl Warren: Yes.
Mr. Rogovin: In 1955, that feature of the ruling was stated but it goes back more than that.
It goes back in the 1920's and 1930's (Voice Overlap).
Chief Justice Earl Warren: And how about the regulation of the Texas officer, how far back to that bill?
Mr. Rogovin: Well, this -- it has been the consistent position that --
Chief Justice Earl Warren: No, I'm talking about the regulation.
Mr. Rogovin: Well, there is -- Justice Warren, there is no regulation involved.
There is a ruling, of 1955 ruling that specifically says that this type of duty would not be construed as being away from home.
But this is merely a construction -- further addition of the position that has been in existence since 1921.
Chief Justice Earl Warren: And is this the first time it's been attacked directly?
Mr. Rogovin: The away from home or the military rulings?
Chief Justice Earl Warren: No, under the circumstances of this case.
Mr. Rogovin: In 19 -- no sir, the Fourth Circuit viewed a similar situation where a 1941 officer was assigned to a military base --
Chief Justice Earl Warren: 1941?
Mr. Rogovin: 1941, and upheld the Government's position.
Justice Byron R. White: Mr. Rogovin, what is the subsistence allowance?
Mr. Rogovin: The subsistence allowance approximately $42 and 50 cents.
Justice Byron R. White: And its purpose is for the feeding of the military officer who must pay for his own meals.
And is it tax free?
Mr. Rogovin: It is by -- yes sir.
Justice Byron R. White: Was there been any argument that if -- that -- there's any -- I suppose deductibility and subsistence are inconsistent a little bit, aren't they?
Mr. Rogovin: Yes sir.
The Government and the Revenue Service has maintained that such subsistence allowances are not taxable.
Having taken that position, do not believe that requiring a netting of the deduction claimed against that which he has received tax free would be an appropriate administrative act to take because it would be making a distinction between those officers who are away from home, away from their residence and those who are living at home.
Justice Byron R. White: I suppose the -- if you're going -- if deductibility were to be granted from this case, I suppose, you could argue consistently that therefore the subsistence allowance should not be tax free?
Mr. Rogovin: I would think that the service would want to reexamine its position with respect to these allowances.
Justice Potter Stewart: Did this man live when he was over there in Japan, at a BOQ of some kind?
Mr. Rogovin: Yes sir, at Iwakuni.
Justice Potter Stewart: And he didn't pay a rent there, did he?
Mr. Rogovin: No, he was given these quarters free.
Justice Potter Stewart: Quarters are free?
Mr. Rogovin: Yes sir.
Justice Potter Stewart: And where did he eat?
In some kind of -- you don't have a wardroom I guess, it was an officers mess --
Mr. Rogovin: Yes sir.
Justice Potter Stewart: -- of some kind?
Organized and operated like a wardroom on a ship?
Mr. Rogovin: Yes sir, it was.
Justice Potter Stewart: Is there any indication of -- I guess, the deduction of the claimed indicate the amount of his -- what those meals costs?
Mr. Rogovin: $65 a month.
For 10 months, that's how the $650 figure was reached.
Justice Potter Stewart: And then there were periods when he was away on temporary duty in which he deducted his meals and which there's no --
Mr. Rogovin: Which is not an issue --
Justice Potter Stewart: -- no issue that he has a right to do so.
Mr. Rogovin: That is correct sir.
Justice Potter Stewart: And during those temporary duty he creates, he also got a per diem if it works the way it used to?
Mr. Rogovin: For the actual days in travel?
Justice Potter Stewart: Yes.
Mr. Rogovin: He did receive a per diem.
Chief Justice Earl Warren: Is there anything peculiar about this particular transaction or is this a normal thing that happens to most officers in the army and the -- and the Marine Corps?
Mr. Rogovin: I believe the frequency of change of duty station is a normal factor.
The allowances that are involved are normal factors.
There are duty stations throughout the world where a family is not permitted.
I would think that many stations in Vietnam would be of that nature.
Certainly, during World War II, you can think of many situations.
And in the record, the Marine Corps Order which prohibited the -- of the family from going with Captain Stidger indicated the four reasons that they would not do so, so that it's possible that it would -- is at page 28 of the record.
They would take into consideration the adverse effect that the presence of the dependents might have on a unit's mission, operational readiness, or combat capability, second, the existence of suitable dependents facilities for all married personnel, third, the standards of living and the general desirability of the area, and fourth, the political climate obtaining in the country is considered.
So that these were considerations as to whether or not the family would be allowed to go over with the officer.
Chief Justice Earl Warren: Is this the first decision against the Government on this issue?
Mr. Rogovin: There had been decisions on the question of whether home is residence.
The Fifth Circuit in Flowers, the Ninth Circuit in a number of instances, and possibly the Sixth Circuit to be interpreted in saying home should be read as the residence and not usual place of employment.
All the other Circuits say for the first which I don't believe this commented on the issue have all maintained what the Government's position that home should be construed as usual place of employment.
As to the military feature, the only other case was the Bercaw case in the Fourth Circuit where the Government was upheld.
Chief Justice Earl Warren: That was in ‘41 for -- or thereabouts.
Mr. Rogovin: Soon after the war, yes sir.
Chief Justice Earl Warren: Yes.
Mr. Rogovin: Thank you.
Chief Justice Earl Warren: Mr. Reed.
Argument of John A. Reed
Mr. John A. Reed: May it please the Court.
I appear as amicus curiae in support of the decision below.
First, in answer to the question raised by Justice Fortas, I agree with Rogovin that the -- Captain Stidges orders assigning him to the Far East are not in the record.
There is in the record however the -- a Marine Corps procedure in such cases which became effective a few months -- while Captain Stidger was in Japan, which outlines the regular tours of duty of abroad of marine personnel and says that for a tour of duty where he was, his tour of duty will be 15 months.
Captain Stidger testified that before the Tax Court that when he went over there, it had the similar procedures had said 14 months and that he was increased a month while he was there.
As far as the meaning of the word permanent duty station.
Again in question of Justice Fortas, in Revenue Ruling 55-571, again I agree with Mr. Rogovin that that is a term appearing in the U.S. Code and it said in Title 37 on paying allowances of the armed services.
And it pretty much says that whatever the Commandant said it is but it refers to a shore station or home port.
It obviously ties in it seems to me with tours of duty as outlined in the marine procedures so --
Justice Potter Stewart: That's in 37 United States Code Mr. Reed (Inaudible).
Mr. John A. Reed: Yes sir, that's --
It was the old Section 253 of Title 37, its since been given a new number.
Justice Potter Stewart: Thank you.
Mr. John A. Reed: And so the -- when the -- this Revenue Ruling about permanent duty stations which was first promulgated in 1955 and I think had no counterpart in any earlier ruling.
I disagree with Mr. Rogovin, I don't think -- it certainly hadn't been announced before 1955 as the policy of the service.
When it says that an officer in the armed services on permanent duty abroad may not deduct his meals abroad whether or not he is prohibit from taking his family with him.
I think that was a completely new approach.
I think it undoubtedly was -- it got that word permanent duty station was taken over from the statute on paying allowances.
And I think permanent in that sense meant 15 months or 18 months or up to three years in the marines.
That -- this is the maximum tour of duty according to the record.
So I think permanent is -- in a text sense is a misnomer and I don't say any reason to use this permanent as distinguished from temporary.
In the text sense, I don't see any reason to give any weight to what the pay in allowances provision of the statutes may say.
How it may characterize it.
Now, back to the -- I agree generally with Mr. Rogovin's statement of the facts with one or two exceptions.
I think that Captain Stidger testified that he was ordered to the Far East rather than in -- rather than to Iwakuni and the marine procedures indicate -- confirmed that, the marine procedure reproduced in the record at pages 24 to 31.
And actually the -- he was not always at Iwakuni.
He moved around at good deal around the Far East and in the taxable year of 1958, the account of the year involved, he is claiming deduction for only ten of the -- ten months.
And the record, the -- his itinerary reproduced in the record, page 16 of the record, if my addition is correct, it shows -- is correct, shows that he was only in Iwakuni during this taxable year for approximately 240 days or eight months.
And so that I submit that he is for the other two months approximately of the deductions claimed, he was at other point -- other military post in the Far East.
And he testified he ate almost entirely at various officers' messes.
And so I think that is somewhat analogous to Justice Fortas' query as to what happens if he is transferred from Iwakuni?
Justice William O. Douglas: He's gone 10 months altogether?
Mr. John A. Reed: He was out of United States a little over 11 months.
But he was only at Iwakuni eight months.
And the itinerary at page 16 shows the rest of that term.
He was at other places in Japan and Philippine Islands.
He came back to California for two months in the middle of -- two weeks and in the middle of it.
So we do have involved here to some extent at least, say two months worth or two times $65 a month, the -- something very analogous it seems to me to the Revenue Ruling 571, that's the ruling reconsidered in the letter in the reply brief, something very analogous to a naval officer whose permanent base is considered to be let's say Iwakuni and he's considered to be on temporary duty afloat if he will, although he actually, I think he went by plane from naval station to naval station.
And I would think that as to two months approximately, that even Mr. Rogovin would concede that the deduction is allowed on any event, on anything --
Justice Potter Stewart: I understood there were -- as you say -- there was no issue as to that, as to the time he was away from Iwakuni as I --
Mr. John A. Reed: I'm not sure, (Voice Overlap) --
Justice Potter Stewart: As I read the end of the -- here at page 17, the petitioner himself says that the only issue before the Court, the only issue remaining is whether or not petitioners are entitled to a deduction for traveling expenses consisting of meals while at Iwakuni, Japan to the taxable year 1958.
And that meals, while he was away on temporary duty status away from Iwakuni, that there is no issue at all about it?
Mr. John A. Reed: Well, the conclusion of the Government's brief is that the judgment below should be reversed for -- I don't know what their -- had -- what the Government's position is on these two months, Mr. Justice.
But perhaps Mr. Rogovin will enlighten us.
Justice Potter Stewart: Yes.
Justice William J. Brennan: And you claim Mr. Reed is that on this itinerary, this shows only eight months, actually at the --
Mr. John A. Reed: 240 days at Iwakuni during the calendar year 58.
Justice William J. Brennan: And the claim deduction was for --
Mr. John A. Reed: 10 months
Justice William J. Brennan: -- 10 months for $65, isn't that right?
So that if this related only to Iwakuni it should be eight times 65 rather than 10?
Mr. John A. Reed: And Captain Stidger testified on that and -- before the Tax Court that he did moved around from point to point and that he got his meals wherever he could.
He ordinarily paid for his meals at officers' messes as he said.
He was appearing without counsel as you know.
Chief Justice Earl Warren: But when he was away from, at Ikanuwi, whatever the name of the place is --
Mr. John A. Reed: Iwakuni.
Chief Justice Earl Warren: -- he got his expenses, was he not?
Mr. John A. Reed: Well, he did for 49 days and for those 49 days for which he did get his per diem allowance, he is claiming no deduction.
And that explains to a large extent why he is only claiming a deduction for 10 months of the calendar year 58 rather than 12 months, the 49 days are -- that deal with the other two months that two plus 10 is 12.
Chief Justice Earl Warren: Yes.
Mr. John A. Reed: I think the other two weeks are the two weeks that he got back to California in mid-December.
I don't believe that the previous decisions of this Court aren't all controlling in this case.
The victim from the opinion of -- majority opinion in the Flowers case which Justice Rogovin read and -- which Mr. Rogovin read which appears on page 12 of my brief, I don't read it as contrary to the position here where Justice Murphy said -- writing for the Court said that the exigencies of business rather than the personal conveniences and necessities of the traveler must be the motivating factors.
I don't think anyone would contend that we have involved here Captain Stidger's personal conveniences and necessities.
It seems to me that I would rather read that as very much to the same at least not inconsistent with the position of the court below in this case that it all depends on whether or not it was reasonable for the taxpayer to move his family to where he went.
And I certainly think that in the Flowers case involving the railroad lawyer down south it would have been quite reasonable for them -- for him to move his family to his new post of duty.
So I don't think the Flowers case is really -- certainly no more as -- doesn't support the Government any more than the taxpayer if as much.
The other -- only other opinion of this Court, the Peurifoy case in 1958 I believe.
Again, I think the majority opinion went out from procedural grounds and I don't believe that it's really took a position on the meaning of home or the meaning of temporary.
The dissenting opinion of Justice Douglas in which Justices Black and Whittaker joined, it seems to me to say substantially what the majority of what the court below said and substantially what I tried to say in my brief.
The legislative history of this statute I think really doesn't throw much light on the meaning of it except for perhaps that these -- the 63 history.
The 63 recommendation of the Treasury Department to Congress admitting there was a good deal of uncertainty in this area suggested that the statute be rewritten to be more definite and perhaps the salient feature of the proposed legislation would have been to impose an absolute limit of 12 months on temporary absence.
And I think that the fact that Congress rejected that legislation perhaps raises some inference that it didn't want any limit on 12 months.
Mr. Rogovin says the length of time is not relevant but I don't think that the Internal Revenue Service has ever publicly so stated in all the -- all their publications and indicated the length of time is very relevant and that they will very rarely allow an absence of more than 12 months to be treated as temporary.
Now, to go back to the basic temporary rule which is perhaps important here.
As I understand the Government's position, the service's position, it is that home is duly to be construed as meaning a principal place of business.
But they recognized that if a man is only traveling for a short time of course or even if he moves to a new place of business but is only going -- only thinks he's going to be there temporarily, they recognized that that would be on -- it seems to me they recognized that it would be unreasonable to ask him to move his family and unreasonable to deny him the deduction for his meals let's say as a temporary place of employment in view of the duplicate expenses he has -- where he came from for his family and living expenses.
And so that the Government's temporary rule started off as equitable, fair, and sensible.
But they have -- I submit they have not followed it to its logical conclusion.
Some were along the line and they decided that they didn't want to extend it very far.
They've been limiting it.
I don't know why.
They've generally say that it shouldn't be for more than 12 months.
And somewhere along the line, I think they've gone off the track.
I don't think that the period of time should be relevant.
It seems to me even a man in the Far East for two years or three years prohibited from at least -- he's prohibited from taking his family and has duplicate expenses at home should be allowed to deduction.
Mr. Rogovin says that the Government is relying here not on the fact that Captain Stidger was overseas for 14 or 15 months, but that's alright.
But that fact that he cut his business ties with the -- in California and had no business purpose to be away from California, I don't know what that means.
The construction work as ruling issued by the Service in 1960 is to the contrary.
It says that they will no longer consider whether the employer had a business purpose or the employee -- for what the employee did and they would -- and they will admit that if the employee -- they will admit that an employee may have a business purpose for moving his -- the places where he works.
And if there is an employee's business purpose, that's enough.
Well, it seems to me Captain Stidger didn't have a business purpose to be away from California.
Justice Abe Fortas: Mr. Reed, what do you do with Mr. Rogovin's illustration?
He says he lives in Annandale, which is in Virginia, works in Washington and he says that he's nevertheless -- his home in Annandale -- he's nevertheless not entitled to deduct the cost of his lunches at the Department of Justice cafeteria.
His wife feed him for about 10 cents for lunch, incremental costs of his lunch.
There, he has to go down to the Department of Justice, go to cafeteria, and spend vast sums for lunch?
Mr. John A. Reed: I would not --
Justice Abe Fortas: He says --
Mr. John A. Reed: I would not permit Mr. Rogovin to deduct his lunch.
I think perhaps the simplest way to address the opinion on would be on that point -- would be to say that his home is the entire area including a big circle including Annandale and the District of Columbia.
Justice Abe Fortas: Well yes, but in theory, that is to say if we are going to engage in (Inaudible) to getting to believe is the dubious exercise of logic as applied to this problem.
In theory, doesn't he have a point that justifies what was done in the case before us?
That is to say he says that, this illustration shows that home for tax purposes.
And Mr. Rogovin's case shows that home for tax purposes is something other than home where the wife and the children are.
Mr. John A. Reed: I don't think so, perhaps this -- perhaps there's a logical, theoretical point there but I would think this Court in the footnote to its opinion in this case could make it clear that it wasn't covering that situation.
I really think the best way to do that would be to draw -- say that he is at home whether he is in the place where he works or he lives in the suburbs.
At home, in other words, covers in a radius of -- quite a large radius.
Justice William J. Brennan: But suppose he lives out in the Morris Country, New Jersey Mr. Reed --
Mr. John A. Reed: Mr. Weisman (ph) --
Justice William J. Brennan: -- and he commutes now or commutes to New York City everyday?
Mr. John A. Reed: I have --
Justice William J. Brennan: Is that all part of the home area?
Mr. John A. Reed: I think so, I think so.
Justice William J. Brennan: I guess it's going to get bigger when people commute by plane.
Justice Byron R. White: Well, there are good many people now who live in Washington and work in New York and the reverse.
Mr. John A. Reed: Yes.
Justice Byron R. White: And if they do it everyday -- commute everyday, what about that?
Mr. John A. Reed: What you make out of that, I think a -- I think part of the work here can be done by the ordinary and necessary part of the statute.
In other words you can only deduct the expenses if they are really ordinary and necessary expenses of the business.
And I think that even though you have a child at home that you can take care of cases like that under ordinary and necessary.
Justice Byron R. White: What do you mean?
Mr. John A. Reed: I really don't think that that should affect the result of this case.
Now, Mr. Rogovin's analogy of Captain Stidger really having no business ties except Iwakuni and therefore not being away from home.
Perhaps the -- perhaps an analogy to be considered in that connection is the case of the traveling salesman who is on the road virtually all the time and really has no place of business, no fixed place of business.
Now, as I understand it, such a person is allowed to deduct his expenses for meals other traveling expenses on the road.
At least if he has a duplication in living expenses, at least if he has a family and a home somewhere and I refer to several cases to that effect are cited at page 20 of my brief.
And all those cases indicate that it's crucial whether or not there is a duplication in expenses.
Seriously enough, the Government publication of your income tax put out each year to help taxpayers make out their income tax returns says flatly that the traveling salesman may deduct their expenses.
Doesn't even indicate that there has to be a duplication in expenses but all the cases insisted there'd be a duplication in expenses.
Now, I don't think that Mr. Rogovin has argued too seriously the tax windfall point.
I don't really think there is any tax windfall here for servicemen.
It's true that the base -- these basic subsistence allowances as far as subsistence are -- have always been treated as not subject to income tax.
But Captain Stidger got the same pay in the Far East as he had in California, he got the same subsistence allowance in the Far East that he had while he was in California.
And it seems to me that he had additional expenses in the Far East for meals.
These 10 months of meals at $65 a month which he didn't have back in California.
And that it's fair and equitable that he'd be allowed the deduction.
And it seems to me entirely consistent with the statute.
Justice Abe Fortas: Mr. Reed, I noticed in the Government's brief a reference to the action taken by the Congress with respect to Congressmen that is to say that the writing for a specific sum, legislating a specific sum, which they may deduct for their expenses while in Washington.
Now what about that a Congressman has his home in Tennessee, let's say, and he keeps -- maintains his home there.
And then he comes to Washington where he has expenses, living expenses, expenses incident to performance of his duty as a Congressman.
Now leaving legislation aside, what in principle would be the application of the statutory provision to that case?
Mr. John A. Reed: Well, I think that -- I think he -- I think in this -- he can deduct his expenses only if he's away from home.
I think for that purpose, he can only have one home, either his home district or Washington -- District of Columbia.
And I think the -- one of the questions is where -- which -- in which of those two place does he do most of his work?
Which is really his principal place of business?
And is it reasonable -- under my approach at least, is it reasonable tax wise to expect him to move his family to Washington, to the District of Columbia?
And I would think that -- I would guess that his principal work would be here, that he would be here most of the time, at least today, and perhaps not in 1920 or 1921, when this statute was enacted.
And that it would be reasonable to treat this as his tax home because it's where his family should be living, if they aren't living here.
Justice Abe Fortas: Why?
Mr. John A. Reed: And therefore, he should only be allowed of his expenses back in the home district.
Justice Abe Fortas: But then his family shouldn't be living here maybe --
Mr. John A. Reed: Should not be.
Justice Abe Fortas: -- for one reason or another.
I said maybe.
I don't know if that's so, an assumption.
But with Mr. Rogovin's argument, and is it Congress seems to have recognized that in the case of the Congressman, the home would be Washington because Congress specifically legislated that $3000 or whatever it is could be fitted as deductible in lieu -- as deductible expenses $3000 of the cost of living here in Washington.
And that Congress proceeded in other words on the theory that his -- that the Congressman's home for tax purposes was his principal place of business, namely Washington, that's the argument.
And if that is so in this kind of -- in this field in which one rather desperately seeks a place to which to moor one's mind, isn't the -- what do you say, is that helpful or what is the effect to that?
Mr. John A. Reed: I don't think it's really relevant to this case, Mr. Justice.
I think Congress recognized that the position of the Internal Revenue Service was that Congressman could not deduct living expenses in Washington, on the theory that Washington was his called “home” for tax purposes.
And in the light of that attitude and having lost at least one Court decision in the Tax Court on the point involving a Congressman, the Congress enacted this legislation which said that in the case of the Congressman, Washington shall not be considered as home but rather his home district.
Justice Abe Fortas: But ordinarily, he would -- by ordinary principles of construction, I suspect that you would take that as in effect the Congressional revalidation of the services interpretation at least in prior, because that would indicate very clearly that as you stated, Congress did know of the service's construction.
Now, the term home for this purpose, and that then instead of changing it, across the board, this Congress modified not only in the case of -- or made a partial exception only in the case of Congressmen and not about -- and now what you'd do as a matter of conventional legal technique?
Mr. John A. Reed: Well, I agree Your Honor.
But I do think that even under the approach of the court below in this case that the same result would have been reached for a Congressman in the absence of a statute, specific statute.
I think that it would have followed that it would have been reasonable for him to move his family to Washington.
Just as in the Flowers case, the railroad lawyer should have moved his family.
And the -- so that, it seems to me that we get the same result without specific legislation for the Congressman either under the Government approach in this case or under the approach of the court below in this case.
So I don't really think that what Congress did in 1952 is very prudent.
Chief Justice Earl Warren: Mr. Reed, what is your answer to the argument of the Government that the only case in point that's on this subject is in favor of the Government than it was in 1941 in the Fourth Circuit and Congress has had that information ever since that the Department has acted this way since 1941 at least and they say before that, and still no change has been made by the Congress.
Mr. John A. Reed: Yes.
Well, I would say first that the case in the Fourth Circuit, the Bercaw case is quite distinguishable from this case.
That involved a man who lived on a farm in Virginia and who would -- who was just enlisted in the army and was assigned to duty in somewhere in Maryland.
And he didn't see fit to move his family from Virginia to Maryland.
Now true, it was -- there was something said about -- sort of a shortage of - war time shortage of housing around the base in Maryland.
But certainly, he could have move closer to his base than his farm.
And I don't think that in that case, the deduction should have been allowed.
I don't think the expenses were ordinary and necessary.
I think on the balance in the aggregate, the family has a unit where undoubtedly better off living with the rest of the family living on the farm in Virginia, than they would have been regardless of the tax deduction in that consequences, if they had moved the family, say somewhere between Washington and this army post in Maryland.
So I don't think that that was a clean cut decision at all.
And I disagree with Mr. Rogovin when he says the 1955 Ruling went back before that.
I think it was first announced in 1955.
I was thinking now of the part of the ruling that says that officers on permanent duty abroad may not -- are not entitled to any tax deduction even though it's impossible for them to take their families with them.
I find nothing before 1955 announcing that.
And indeed, very little reference to it after 1955 in the books.
In fact it's significant that in the appendix to my brief, I reproduced some excerpts from a pamphlet distributed by the navy, to servicemen which does not reproduce -- does not take that approach at all.
It simply says that they cannot deduct the expenses overseas for an indefinite period.
And it's interesting to speculate on why they don't reproduce that 1955 Ruling.