Ephraim Cross and Mary Cross v. United States
14 A.F.T.R.2d (RIA) 5479, 336 F.2d 431, 1964 U.S. App. LEXIS 4528 (1964)
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Rule of Law:
Summary judgment is inappropriate in a tax refund suit where the taxpayer's primary purpose for incurring travel expenses is a disputed material fact, as questions involving motive, intent, and credibility must be resolved by a trier of fact at a full trial.
Facts:
- In 1954, Ephraim Cross was an Assistant Professor at City College in New York, teaching French, Spanish, and romance linguistics.
- On June 30, 1954, Professor Cross, his wife, and their dog sailed from New York on a French freighter for a summer trip to various Mediterranean and European countries.
- The freighter made brief stops in Portugal, Morocco, Tangiers, Oran, Algiers, Naples, and Genoa over 21 days.
- Upon arriving in Marseilles, Mrs. Cross began touring with a friend while Professor Cross traveled to Paris.
- While in Europe, Professor Cross did not pursue a formal course of study but engaged in activities such as visiting schools, courts, theaters, and cafes; reading local newspapers; and conversing with students and teachers.
- Professor Cross claimed that the purpose of his trip was to maintain and improve his skills as a linguist and teacher.
- On their joint tax return for 1954, the Crosses claimed a $1,300 deduction for the travel expenses, characterizing them as educational.
- The Government contended that the trip was a personal vacation, not a deductible business expense.
Procedural Posture:
- Professor Cross and his wife filed an income tax refund suit against the United States in the U.S. District Court for the Southern District of New York after the Internal Revenue Service disallowed their claimed deduction.
- The plaintiffs (Cross) moved for summary judgment, submitting affidavits from other professors and the deposition of Professor Cross.
- The defendant (the Government) opposed the motion, arguing for the right to cross-examine the plaintiffs and their affiants at trial.
- The district court (trial court) granted summary judgment in favor of the plaintiffs, holding that the expenses were deductible.
- The Government (appellant) appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Second Circuit.
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Issue:
Is summary judgment appropriate in a tax refund suit where the key disputed element is the taxpayer's primary purpose for incurring travel expenses, and the facts surrounding that purpose are largely within the taxpayer's exclusive knowledge?
Opinions:
Majority - Moore, Circuit Judge
No. Summary judgment is inappropriate because the question of whether travel expenses are deductible as 'ordinary and necessary' business expenses is inherently factual and cannot be resolved without a trial when the taxpayer's motive and intent are disputed. The court reasoned that Federal Rule of Civil Procedure 56(c) permits summary judgment only when there is 'no genuine issue as to any material fact.' Here, the taxpayer's primary purpose for the trip is a central, contested fact. The Government is entitled to test the taxpayer's credibility through cross-examination at a trial, which is particularly crucial when the relevant facts concerning motive and subjective feelings are within the exclusive knowledge of the moving party. A judge may not draw inferences of fact on a motion for summary judgment; that function is reserved for the trier of fact at trial.
Analysis:
This decision reinforces the principle that summary judgment is an improper procedural device for resolving cases that turn on a party's state of mind, such as motive or intent. By reversing the lower court, the Second Circuit emphasized that the credibility of a witness is a material fact that must be assessed by a trier of fact. This case serves as a significant check on the use of summary judgment in tax deduction cases where the taxpayer's self-serving statement of purpose is the primary evidence, ensuring the government has a full opportunity to challenge such claims through cross-examination at trial. It solidifies the inherently factual nature of the 'ordinary and necessary' business expense determination under I.R.C. § 162.
