Barry D. And Sandra J. Pevsner v. Commissioner of Internal Revenue
1980 U.S. App. LEXIS 13014, 46 A.F.T.R.2d (RIA) 5938, 628 F.2d 467 (1980)
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Rule of Law:
The deductibility of clothing costs as a business expense is determined by an objective test, considering whether the clothing is adaptable to general usage as ordinary wear, not by the taxpayer's subjective lifestyle or personal taste.
Facts:
- Sandra J. Pevsner was employed as the manager of the Sakowitz Yves St. Laurent (YSL) Rive Gauche Boutique in Dallas, Texas.
- As a condition of her employment, Pevsner was required to wear YSL clothing to project the boutique's exclusive and fashionable image.
- During 1975, Pevsner purchased various YSL items, including blouses, skirts, a trench coat, and accessories, to wear for work.
- The clothing Pevsner purchased was the type of high-fashion apparel that the boutique's customers would buy and wear for their general daily activities.
- Pevsner and her husband led a simple and informal life, and she did not wear the expensive YSL clothing during her off-work hours because she felt it was inconsistent with her personal lifestyle.
Procedural Posture:
- Sandra Pevsner claimed a business expense deduction for the cost and maintenance of her work clothing on her 1975 joint federal income tax return.
- The Commissioner of Internal Revenue disallowed the deduction and determined a tax deficiency.
- Pevsner, the taxpayer, challenged the Commissioner's determination in the United States Tax Court, a court of first instance for tax disputes.
- The Tax Court ruled in favor of Pevsner, allowing the deduction based on her subjective lifestyle.
- The Commissioner of Internal Revenue, as appellant, appealed the Tax Court's decision to the United States Court of Appeals for the Fifth Circuit, with Pevsner as the appellee.
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Issue:
Does the cost of clothing, which is required as a condition of employment, qualify as a deductible business expense under Section 162(a) if the clothing is objectively suitable for general wear, even though the taxpayer does not wear it outside of work due to her modest personal lifestyle?
Opinions:
Majority - Judge Sam D. Johnson
No. The cost of clothing required for employment is not a deductible business expense if the clothing is objectively adaptable to general wear, regardless of the taxpayer's personal lifestyle. The court applied a three-part test for clothing deductibility: (1) the clothing is required as a condition of employment, (2) it is not adaptable to general usage as ordinary clothing, and (3) it is not so worn. While the first and third prongs were met, the second prong—adaptability—must be judged by an objective standard. The court rejected the Tax Court's subjective analysis based on Pevsner's lifestyle, reasoning that an objective test is necessary for administrative practicality and to ensure fairness and consistency among similarly situated taxpayers. Allowing deductions based on individual lifestyle would create disparate tax consequences for employees with identical wardrobes but different social lives, a result inconsistent with the Internal Revenue Code.
Analysis:
This decision solidifies the objective standard for determining the deductibility of work-related clothing expenses under the Internal Revenue Code. It rejects a more flexible, taxpayer-specific subjective test in favor of a bright-line rule that prioritizes administrative convenience for the IRS and horizontal equity among taxpayers. The ruling clarifies that if clothing could be worn as ordinary street wear by a reasonable person, its cost is a non-deductible personal expense, even if an employer requires its purchase and the employee chooses not to wear it personally. This precedent significantly narrows the scope of deductible clothing expenses, limiting them primarily to uniforms and specialized gear not suitable for everyday use.
