Maurice M. Wills and Gertrude E. Wills v. Commissioner of Internal Revenue
23 A.F.T.R.2d (RIA) 1515, 411 F.2d 537, 1969 U.S. App. LEXIS 12405 (1969)
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Rule of Law:
An employee's 'tax home' for purposes of deducting travel expenses is their principal place of business, and prizes or awards for athletic achievement or popularity are generally taxable income unless they fall within specific, narrowly interpreted statutory exceptions for religious, charitable, scientific, educational, artistic, literary, or civic achievement.
Facts:
- Maurice M. Wills has been a professional baseball player since 1951.
- From June 1959 through November 1966, Maurice Wills played baseball for the Los Angeles Dodgers, whose club home is Los Angeles, California.
- In 1958, Maurice Wills bought a house in Spokane, Washington, where he and his family lived.
- In January 1962, Maurice Wills bought a second house in Veradale, Washington (on the outskirts of Spokane), and he and his family moved into it, residing there during 1962 and 1963.
- During 1962 and 1963, Maurice Wills spent at least 87 days each season in Los Angeles as a member of the Dodger team, plus additional time for the World Series and night club preparation, while his wife and five children resided in Spokane, where he spent 138 and 96 days respectively.
- Maurice Wills lived with a church pastor and paid rent for accommodations in Los Angeles during the baseball seasons.
- After the final Dodger game of the 1962 season, Maurice Wills was awarded an MG automobile (fair market value $1,731) by a Los Angeles automobile agency after being voted 'most popular Dodger' by patrons.
- In January 1963, Maurice Wills received the S. Rae Hickok belt (fair market value $6,038.19) for being the outstanding professional athlete of the prior year, based on excellence in athletics as determined by a vote of over 250 sportswriters and sportscasters.
Procedural Posture:
- The Commissioner of Internal Revenue determined deficiencies in Maurice M. Wills and Gertrude E. Wills' income taxes for the years 1962 and 1963.
- The Commissioner asserted that deductions claimed by the taxpayers for travel, meals, and lodging expenses in Los Angeles were not allowable, and that the fair market value of an MG automobile and the Hickok belt were taxable as ordinary income.
- The Tax Court (court of first instance for tax matters) sustained the Commissioner's determination with regard to all three disputed items.
- Maurice M. Wills and Gertrude E. Wills (taxpayers/petitioners) filed a petition with the United States Court of Appeals for the Ninth Circuit to review the Tax Court's decision.
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Issue:
1. Does a professional baseball player's maintenance of a family residence in a different city than his team's headquarters qualify that city as his 'tax home' for purposes of deducting travel, meal, and lodging expenses incurred at the team's headquarters? 2. Are cash-equivalent awards received for athletic prowess and popularity considered tax-exempt prizes for 'civic' or 'artistic' achievement under 26 U.S.C. § 74(b)?
Opinions:
Majority - BARNES, Circuit Judge
1. No, Maurice Wills' maintenance of a family residence in Spokane did not make Spokane his 'tax home,' and therefore his expenses incurred in the vicinity of Los Angeles were not deductible. The court affirmed the Tax Court's determination that Los Angeles was Wills' principal post of business and, thus, his 'tax home' for the years in question. Citing Commissioner of Internal Revenue v. Flowers, the court reiterated that deductible travel expenses 'away from home' only arise when the employer's business forces the taxpayer to travel and live temporarily away from their principal place of business, advancing the employer's interests, and not for personal convenience. Since Wills' employment with the Dodgers in Los Angeles was long-term, not temporary, his motives for maintaining a residence in Spokane were personal rather than business-oriented. The court also gave great weight to the Tax Court's factual finding regarding the location of Wills' tax home. 2. No, the awards Maurice Wills received for athletic prowess and popularity are not exempt from taxation as 'civic' or 'artistic' achievements under 26 U.S.C. § 74(b). The court held that the MG automobile, awarded for popularity, and the Hickok belt, awarded for athletic excellence, did not fall within the specific exceptions listed in § 74(b) (religious, charitable, scientific, educational, artistic, literary, or civic achievement). Following Hornung v. Commissioner and Simmons v. United States, the court emphasized interpreting statutory terms in their ordinary and usual senses. 'Civic achievement' implies exemplary, unselfish action broadly advantageous to the community, which athletic prowess or popularity does not typically encompass. 'Artistic' connotes activities of an aesthetic nature, not athletic success. The court also found support in the fact that Congress had considered and declined to add 'athletic' to the list of exempted prizes in § 74(b), indicating legislative intent. The form of the award (e.g., a 'trophy' like the belt) does not change its taxability if it has a fair market value.
Analysis:
This case significantly clarifies the definition of an employee's 'tax home' for professional athletes, establishing that their principal place of business (the 'club town') is their tax home, regardless of where their family resides. It firmly reinforces the principle that travel expenses are deductible only when business exigencies, not personal convenience, necessitate travel away from this primary work location. Furthermore, the decision narrowly interprets the exceptions for tax-exempt prizes under § 74(b), holding that athletic achievements and popularity awards do not qualify as 'civic' or 'artistic' achievements. This highlights the judiciary's deference to legislative intent in tax matters, placing the burden on Congress to explicitly create new exemptions for categories like athletic awards.
