Manocchio v. Commissioner , 78 T.C. 989 ( 1982 )

Fay, J.,

concurring: I agree petitioner’s claimed deduction is disallowed by section 265(1). However, I disagree with any implication that we are deciding section 265(1) applies to expenses paid out of exempt income as well as to expenses incurred in the production of exempt income.

In a reimbursement situation such as the one presented herein, the expense may be said to have produced the exempt income simply because, if the expense had not been incurred, there would not have been any exempt income. Thus, this case falls precisely within section 265(l)’s disallowance of expenses paid to produce exempt income. Given the legislative history’s indication that the principal target of section 265(1) is expenses incurred in the production of exempt income, I find no reason to consider any possible reach of section 265(1) beyond that clear target. I express no opinion as to whether section 265(1) is to be interpreted to disallow deductions merely because the expenses are paid out of exempt income. That issue is not before us.

Chabot, J., agrees with this concurring opinion.

Whitaker, J.,

concurring: While I agree with the Court that section 265(1) is dispositive of petitioner’s contentions, our cases of Wolfers v. Commissioner, 69 T.C. 975 (1978), and Charles Baloian Co. v. Commissioner, 68 T.C. 620 (1977), affd. per order _ F.2d _ (9th Cir. 1982), are equally dispositive of the claimed deduction. I further agree that the doctrine of equitable estoppel is not applicable here, but I disagree with the majority in characterizing as reasonable petitioner’s reliance on Rev. Rul. 62-213, 1962-2 C.B. 59, and Internal Revenue Service Publication 17.¹

The publication by this Court of its decision in Charles Baloian Co. v. Commissioner, supra, makes reliance by petitioner unreasonable and not only justifies but requires the retroactive application of Rev. Rul. 80-173. In Baloian, we recognized that a taxpayer is not entitled to a deduction otherwise allowable to the extent that he has a fixed right to reimbursement of the otherwise deductible expenses. This decision was filed many months before the petitioner filed his income tax return for 1977. Respondent, in Rev. Rul. 78-388, 1978-2 C.B. Í10, also stated his position on reimbursed moving expenses, relying in part on this aspect of our Baloian decision. In fact, this state of the law was presaged as far back as our decision in Cochrane v. Commissioner, 23 B.T.A. 202 (1931). See also Burnett v. Commissioner, 356 F.2d 755 (5th Cir. 1966), cert. denied 385 U.S. 832 (1966). Under these circumstances, the delay in correcting the position stated in Rev. Rul. 62-213 cannot be used by petitioner as a basis for estoppel. Petitioner was adequately on notice that Rev. Rul. 62-213 in this respect was an incorrect statement of the law. Petitioner’s reliance on the 1962 Revenue Ruling and on Publication 17, if in fact there was reliance, was misplaced and clearly unreasonable.

Kórner, J, agrees with this concurring opinion.

1 As the majority points out, there is at least some doubt whether or not petitioner did rely on these statements of respondent’s position.