Hegedus v. Commissioner
This text of 1965 T.C. Memo. 11 (Hegedus v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
Memorandum Findings of Fact and Opinion
DAWSON, Judge: Respondent determined a deficiency in the income tax of petitioners for the year 1960 in the amount of $671.99. The only issue presented is whether the amount of $2,640.08 received by petitioner, Walter J. Hegedus, from his employer, Farrel-Birmingham Company, Inc., as reimbursement for certain expenses incurred by him when he was transferred by his employer from*320 Akron to Pittsburgh, constituted taxable income or a gift. Respondent's determination increased petitioners' adjusted gross income, thus resulting in a decrease of allowable medical expense.
Findings of Fact
Some of the facts have been stipulated by the parties and are so found.
Walter J. Hegedus and Charlotte C. Hegedus are husband and wife, who now reside at 30 Park Road, Pittsford, New York. They filed their joint Federal income tax return for the calendar year 1960 with the district director of internal revenue, Pittsburgh, Pennsylvania.
Prior to and during the year 1960, Walter J. Hegedus (hereafter called petitioner) was employed by the Farrel-Birmingham Company, Inc. (hereafter called Farrel). Petitioner and his family resided during part of 1959, and for several years prior thereto, at Lyndhurst, Ohio. Petitioner was employed in the Akron, Ohio, office of Farrel as a sales engineer.
During 1959 petitioner was transferred by Farrel to Pittsburgh, Pennsylvania. The transfer was for the convenience of Farrel. All direct costs, i.e., moving and transportation expenses, incurred by petitioner in connection with this move were paid by Farrel.
On August 26, 1959, petitioners*321 purchased a residence at 4179 Timberland Drive, Allison Park, Pennsylvania. They sold their Lyndhurst, Ohio, house on October 11, 1959. The sale of the Lyndhurst house resulted in a gain of $3,643 which petitioners reported in their 1959 Federal income tax return. They did not include the gain in taxable income but reduced the basis of the Allison Park house by such amount. The computations are reflected in their 1959 tax return.
Farrel has a company policy relating to reimbursement of relocation costs to its employees when they are transferred from one location to another. This policy became effective on January 1, 1960, and was not retroactive. In transferring an employee for the convenience of the company, Farrel pays relocation costs in addition to the direct costs for moving and transportation. These relocation expenses are set out in the Sales Manual of Farrel, as follows.
e. Specific expenses in connection with the sale of the employee's home and including only items of:
(1) Real estate broker's fee not exceeding the standard rate effective in the area. (To be approved in advance if rate exceeds 5%).
(2) Local, state and federal real estate transfer taxes.
(3) Contractual*322 penalties invoked by mortgagor because of prepayment of mortgage balance to the extent, as determined by the Company, that such penalties are reasonable and unavoidable.
(4) Cost of notary and recording fees required of seller.
(5) Attorney's fee (if any) for closing. The above expenses to be paid only if the home is sold within six months. This period may be extended if approved in advance by the Salary Committee.
f. Specific expenses in connection with the purchase by a home owner of a home at the new location not to exceed $300 and including only items of:
(1) Title search,
(2) Title insurance, or
(3) Legal costs
only, however, if such purchase is made within one year from the date of transfer.
g. A transferred employee may be renting at his present location and the cancellation of his lease may be an additional expense to him. The employee will be reimbursed for such an additional expense up to the equivalent of 2 months' rent.
h. The Company will reimburse nonexempt salaried employees for miscellaneous expenses such as refitting carpeting, drapes, etc. incurred in connection with the transfer of the employee by the Company from one location to another but such*323 reimbursement shall not be in excess of two weeks' basic salary or $300, whichever is greater. In the case of exempt salaried personnel reimbursement shall not be in excess of one-half a month's salary or $300, whichever is greater. This expense reimbursement shall be made only to employees who now have fully furnished apartments or homes and who reestablish themselves on a similar basis in the new location.
In March 1960 petitioner furnished Farrel with a statement showing his loss of equity ($4,130) on his 1959 move from Akron to Pittsburgh. Later in 1960 petitioner received $2,640.08 from Farrel, which was shown on the corporate books as follows:
| Broker's commission, taxes and mis- | |
| cellaneous transfer fees in connec- | |
| tion with the sale of the Ohio prop- | |
| erty | $1,227.30 |
| Survey appraisal and legal fees, and | |
| taxes in connection with the pur- | |
| chase of Pennsylvania property | 607.89 |
| Interest on interim note | 198.55 |
| Portion of taxes and utilities for two | |
| months | 138.00 |
| Allowance for one-half month's salary | 468.34 |
| Total |