MEMORANDUM FINDINGS OF FACT AND OPINION
DAWSON, Chief Judge: This case was assigned to and heard by Special Trial Judge Randolph F. Caldwell, Jr., pursuant to Rules 180 and 182, Tax Court Rules of Practice and Procedure. The parties have filed no exceptions of law or fact to Special Trial Judge Caldwell's report. The Court agrees with and adopts his opinion which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
CALDWELL, Special Trial Judge: This case is one of a group of 37 which were consolidated for trial, but not for opinion. At the trial, evidence was received which bears upon every case in the group. Such evidence relates to certain contractual arrangements between the male petitioners' employers, Lockheed Aircraft Service Company (hereinafter, "Lockheed") and Dynalectron Corporation (hereinafter, "Dynalectron"), and the United States Air Force, as well as the employment arrangements between field team members (such as the male petitioners) and such employers.
Respondent determined a deficiency in petitioner's 1969 Federal income tax in the amount of $796.34. By amendment to his answer to conform the pleadings to the proof, respondent seeks an increased deficiency in the aggregate amount of $900.14, an increase of $103.80 over the amount determined in the statutory notice of deficiency. The sole issue for decision is whether all or any portion of the per diem payments received by petitioner from Dynalectron in 1969 is includible in his gross income for that year under section 61(a)(1) of the Internal Revenue Code of 1954; 2 and, if so, whether petitioner is entitled to deduct an amount equal to all or any portion of the includible per diem payments, as away-from-home traveling expenses under section 162(a)(2).
FINDINGS OF FACT
Petitioner filed his 1969 Federal income tax return with the Internal Revenue Service Center at Kansas City, Missouri. Petitioner resided at Springerton, Illinois, at the time he filed his petition in the present case.
Petitioner was employed by Dynalectron as a team leader of several field teams during 1969. That corporation, as well as Lockheed, had a contract with the United States Air Force during that year to provide field team services for the maintenance and modification of weapons systems (i.e., aircraft) and/or support equipment.
These contracts were called "basic contracts" and the Air Force entered into such a contract with each of three different contractors. The contracts were for three years maximum duration, and those involved here were for the three fiscal years, July 1, 1967-June 30, 1968; July 1, 1968-June 30, 1969; July 1, 1969-June 30, 1970. The contract was firm for the first of the three years; but the Air Force had the unilateral right to extend the contract for the second and third years of the three-year period. The contracts were so extended by the Air Force insofar as both Lockheed and Dynalectron were concerned. (The record herein does not identify the third contractor who had the basic contract.)
The basic contract did not, of itself, award any work to be performed thereunder. It did specify the wage rates which would be paid for services rendered by employees of the contractor, if the contractor got work to be performed under the contract. The contract also contained the following provisions relating to the payment of per diem:
(ii) Per Diem, not to exceed the applicable amounts set out below, when actually paid by the Contractor and approved by the Administrative Contracting Officer, shall be reimbursed to the Contractor, without regard to the duration of the assignment; provided, however, that no per diem shall be authorized or paid to any employee whose actual residence is within 50 miles of the work station to which the employee is assigned, nor shall any per diem be paid to any employee who actually resides at and commutes from his actual residence during the period of his employment, regardless of the distance between said residence and his assigned work station: (See (ii)(e) below).
(a) In the CONUS (No quarters and messing facilities furnished by the Government)-- $11.00-Per day per man for Engineer and Leadman and $9.00-Per day per man for the remainder.
* * *
(e) For the purpose of this contract the term "actual residence" is defined as the fixed or permanent domicile of an employee. The employee shall certify to the location of his fixed or permanent domicile and this location, if accepted by the Contractor, shall be deemed, for the purpose of this contract, to be the employee's domicile in so far as per diem authorization against this contract is concerned. However, this does not relieve the Contractor of his responsibility to ascertain that the certification is valid.
The opportunity for the contractor to perform under the basic contract arose from the issuance by the Air Force of a work order thereunder. Issuance of a work order was entirely within the discretion of the Air Force, and it alone had the discretion to select which one of the three holders of a basic contract that was to perform the work order. Performance under a work order might be at any place in the United States or at any place overseas where the Air Force maintained a base. Under the terms of the basic contract, work orders could only be issued during a given year of a basic contract. However, completion of a work order actually issued during such year might be effected after the end of the year.
When the Air Force had determined to issue a work order and had notified a contractor of its selection to perform that order, representatives of the Air Force and of the contractor would get together at a "pre-dock" meeting where the time for completion of the contract and the make-up of the contractor's projected field team complement would be worked out. Determination of the time of performance entailed fixing an input-output schedule -- the schedule which showed the number of units coming into the contractor for its maintenance and modification services per day or week or month, and the number of units to be completed by the contractor per day or week or month.
After the projected field team complement had been worked out, the contractor would then proceed to get the team together. In assembling the team, the contractor would utilize two sources of manpower: (1) existing employees which it transferred from jobs under other work orders; and (2) new employees which it recruited.
Whenever a contractor hired a new employee for field team work, that employee was advised that he was subject to being sent anywhere that the contractor might be called upon to perform a work order, and that if the employee was unwilling to travel where thus directed to go, his only alternative was to resign. The employee was also advised that the contractor only had a basic contract for a year and that it had no way of knowing whether or when it would receive work orders under that contract. It was also made clear to the employee that, while the contractor would endeavor to continue to utilize the services of the employee after completion of the work order in connection with which he was hired, it could not guarantee any such further employment; and if none were available, the employee would be laid off. Neither Lockheed nor Dynalectron maintained any pool or central area where an employee who had completed an assignment could be sent pending the contractor getting another work order on which such employee could be used.
Both Lockheed and Dynalectron were involved in the performance of work orders at Key Field in Meridian, Mississippi, during the years involved. 3Lockheed had first come to Meridian in 1965 and it remained there until June 30, 1969, at which time (although it did not lose its status as holder of one of the three basic contracts) it was supplanted by Dynalectron. During the fiscal year ended June 30, 1969, Lockheed received two work orders to be performed at Meridian; and during the succeeding fiscal year, Dynalectron likewise received two work orders. While in most instances, the contractor's field teams were sent to the location where the aircraft were located, in the case of the work orders performed at Meridian, the aircraft were brought by the Air Force to that work site from other locations.
During the performance of a work order, the Air Force always had an on-site representative, monitoring the performance of the contractor. One of the areas of concern was to determine whether the field team was over strength or under strength, as well as the quality of work of the field team members. Instances occurred when the composition of the field team was changed as the result of the recommendation of the Air Force's on-site representative. For this reason, as well as for the reason that the composition of the field team varied according to the nearness in point of time to the beginning or the end of the performance under the work order, the projected field team complement as worked out at the pre-dock meeting might vary as much as 10 to 20 percent during the performance of the contract.
When an employee was hired, or rehired, by a contractor, he was required to certify to the contractor his "permanent or domicile" address (in the case of Lockheed) or his "fixed or permanent domicile" (in the case of Dynalectron). If the address so certified was further than 50 miles from the job site where the employee was to work and if the employee did not drive back and forth to work, irrespective of the address which he had furnished, he was paid the per diem mentioned and described above. The per diem payments made by the contractors were included in their invoices to the Air Force, solely for the purpose of being reimbursed. There was no element of profit to the contractors in the per diem for which they sought reimbursement.
Per diem paid to the field team employees who qualified therefor was at the rate of $11 per day for a leadman and an engineer, and $9 per day for the other members of the field teams. Per diem was paid for seven days per week, although the regular work week for field team members was a 5-day, 40-hour week. Field team members also received per diem during their initial travel to a work site, for days of travel when transferred to different work sites, and for a maximum of three days for return to their homes, in the event they were laid off. They did not receive per diem during vacation periods; but they did receive per diem for three days up to a maximum of six days if they were sick.
Neither Lockheed nor Dynalectron withheld Federal income tax from the per diem payments made to their employees.
Petitioner first became employed by Dynalectron in 1956. In July 1966 he was sent to the Philippines where he remained for about 15 months when he was sent to Vietnam where he remained until the early summer of 1968. Petitioner returned to the United States following his Vietnam assignment; and, after a brief stop at Travis Air Force Base in California, he was assigned to Dynalectron's home office in Fort Worth on June 28, 1968. The Fort Worth assignment was to have been permanent. However, the workload there diminished, and on January 28, 1969, the company assigned him to Atlanta. Slightly more than a month later, on March 3, he was assigned to Lincoln, Nebraska. The duration of the Lincoln assignment was equally brief, and on April 4, petitioner was assigned to Syracuse, New York, with a three-day stopover at Baltimore, to participate in a pre-dock meeting. Then, on August 4, 1969, petitioner was assigned to Key Field at Meridian, where he remained for the balance of the year and until September 1970 when he was assigned back to Fort Worth.
Petitioner advised Dynalectron in July 1966 and periodically thereafter that his "actual residence * * * fixed or permanent domicile" was Springerton, Illinois. That is the home of his parents and they have their residence in that small community in White County in southeastern Illinois, where petitioner was born (in 1929) and raised. Petitioner was married for the first time in 1946, at which time he ceased living with his parents. His first marriage ended in divorce in 1965, and at the time of trial petitioner's first wife and their children were living in Arizona. Petitioner contracted a second marriage later in that year and his second wife accompanied him in 1966 to the Philippines. When petitioner left the Philippines in 1967, his second wife did not accompany him. He has not seen her since that time, and during 1969 as well as at the time of trial, he did not know where she was. They had no children. They have not been divorced.
Petitioner owns no real property in Springerton. There is a bedroom set aside for petitioner's use in his parents' home in Springerton. Petitioner has a television set and other personal belongings at the parents' residence. The telephone at the residence is in petitioner's name and he pays the cost of maintaining that service. He pays for no other utilities. Petitioner is registered to vote in White County and with the Selective Service local board in the county seat at Carmi.He maintains his principal bank account there. His automobile carried Illinois license plates in 1969. During 1969, petitioner was in Springerton for a total of about 30 days during his vacation as well as between his several assignments in that year. Whenever petitioner is in Springerton, he buys groceries and at least on one occasion bought paint for the house. Petitioner, an only child, goes to Springerton as frequently as he can to visit his parents who are elderly and whose health is none too good. He does not send funds regularly for the maintenance of the household there.
While on each assignment in 1969, petitioner stayed in rented quarters -- a motel, the YMCA, or an apartment.
During 1969, petitioner received per diem payments totalling $3,487 from Dynalectron, none of which did he include in gross income on his return for that year. In his statutory notice of deficiency, respondent determined that $3,150 of the per diem payments was includible in petitioner's 1969 gross income under section 61. By amendment to his answer to conform the pleadings to the proof, respondent asserts that the entire $3,487 should have been included in petitioner's gross income for 1969.
OPINION
It must first be determined whether the per diem payments received by petitioner from Dynalectron in 1969 are includible in his gross income for that year. It is believed that they are.
In very broad language, section 61(a)(1) provides that "gross income means all income from whatever source derived." The Supreme Court has construed this "broad phraseology" as evincing a Congressional intention "to tax all gains except those specifically exempted." Commissioner v. Glenshaw Glass Co.,348 U.S. 426, 430. The per diem payments were "undeniable accessions to wealth, clearly realized and over which the [petitioner had] complete dominion" ( Commissioner v. Glenshaw Glass Co.,supra, p. 431); and thus they were gains. The Code contains no provision exempting per diem payments from taxation. Manifestly, then, the respondent was correct in including in petitioner's gross income for 1969 the entire amount of the per diem payments which he received in that year. Leo C. Cockrell, 38 T.C. 470, 477-478, affd. (8th Cir.) 321 F.2d 504; Darrell Spear Courtney,32 T.C. 334. 341. 4
The question remains whether petitioner is entitled to deduct under section 162(a)(2) an amount equal to all or any portion of the includible per diem, as expenses of travel while away from home in pursuit of his trade or business as an employee of Dynalectron. Leo C. Cockrell,supra, p. 479. In the Cockrell case, it was pointed out that the Supreme Court in Commissioner v. Flowers,326 U.S. 465, rehearing denied 326 U.S. 812, had laid down three requirements that a taxpayer must meet to be entitled to deduct away-from-home expenses. The expenses must be (1) reasonable and necessary traveling expenses; (2) incurred by the taxpayer while away from home, and (3) incurred in pursuit of business. In the present case, the parties are apart on the matter of whether petitioner was away from home.
In the case of Truman C. Tucker,55 T.C. 783, 786, the factors to be considered in determining whether a taxpayer should be treated as away from home for tax purposes were crystallized. It was there said:
The purpose of allowing the deduction of living expenses while a taxpayer is "away from home" is "to mitigate the burden of the taxpayer who, because of the exigencies of his trade or business, must maintain two places of abode and thereby incur additional and duplicate living expenses." Ronald D. Kroll,49 T.C. 557, 562 (1968). In furtherance of this purpose, when a taxpayer with a principal place of employment goes elsewhere to take work which is merely temporary, he may deduct the living expenses incurred at the temporary post of duty, because it would not be reasonable to expect him to move his residence under such circumstances. Emil J. Michaels,53 T.C. 269 (1969); Ronald D. Kroll,supra.For this purpose, temporary employment is the type which can be expected to last for only a short period of time. Beatrice H. Albert,13 T.C. 129, 131 (1949).
Two points emerge: Were petitioner's 1969 assignments temporary, as opposed to indefinite? And, did he maintain two places of abode during each assignment and thereby incur additional and duplicate living expenses?
With respect to the first point, respondent concedes on brief that petitioner's assignments at Fort Worth, Atlanta, Lincoln, and Syracuse were temporary; but he contends that the Meridian assignment was indefinite. It is not believed that that contention is meritorious. Bearing in mind the contractual arrangements between Dynalectron and the Air Force, the employment arrangements between petitioner and Dynalectron, and petitioner's employment history with Dynalectron; and viewing matters as of December 31, 1969, when petitioner's Meridian assignment was only somewhat less than five months old, it is believed that the Meridian assignment must likewise be regarded as temporary, rather than indefinite. Thus, all of petitioner's 1969 assignments were temporary.
With respect to the second point, whether petitioner maintained two places of abode during each of his assignments and thereby incurred those additional and duplicate living expenses to mitigate the burden of which is the aim and purpose of the deduction afforded by section 162(a)(2), it is believed that the answer must be that he did not. It was at the locale of each of the five assignments that petitioner ate, slept, worked -- in short, made his home; and it was in those locales, and not in Springerton or anywhere else that he incurred his living expenses. Thus, he did not incur any additional and duplicate living expenses. There is no gainsaying that he had ties to Springerton. But he performed none of his work there, and his presence in Springerton during 1969 -- and, indeed, it appears from the record ever since 1946 -- was only on vacations and on visits between assignments. The Springerton home was that of his parents, and the abode was maintained by them, with, to be sure, some assistance from petitioner, their only (and a dutiful) son. That assistance -- maintaining a telephone and buying groceries when he was in Springerton -- does not suffice to qualify as maintaining a place of abode in Springerton by petitioner. It is believed, in conclusion, that petitioner's tax homes, for the purposes of section 162(a)(2), were at the locales of his several work assignments, and the result must be that he was at, not away from, home during each of those assignments. Accordingly, petitioner should not be allowed any deduction under section 162(a)(2) for 1969.
In accordance with the foregoing,
Decision will be entered for the respondent.