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KENNETH W. DICKMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, RespondentDickman v. CommissionerDocket No. 3699-79.
United States Tax Court T.C. Memo 1983-484; 1983 Tax Ct. Memo LEXIS 313; 46 T.C.M. 1102; T.C.M. (RIA) 83484;August 15, 1983. Kenneth W. Dickman, pro se.Michele D. Palmer, for the respondent.WILBURMEMORANDUM FINDINGS OF FACT AND OPINION
WILBUR,
Judge: Respondent determined a deficiency of $309 in petitioner's Federal income tax for the taxable year 1975. The issue for decision is whether petitioner may deduct expenditures for travel, tools, equipment and supplies, professional books, and union dues as business expenses under section 162(a).1983 Tax Ct. Memo LEXIS 313">*314 tax return with the Internal Revenue Service. 1983 Tax Ct. Memo LEXIS 313">*315 to improve his ability to translate foreign literature.Petitioner's European trip lasted twenty-five days and covered six Northern European countries. Petitioner spent sixteen of those days as follows:
Number of Days Activity 10 Travel to and from Europe and travel between several European countries. 2 Recovering from jet lag, rest. 2 Sightseeing with wife. 1 Searching for accommodations. 1 Attempting to have battery charger repaired. There was no evidence offered as to the extent or purpose of petitioner's activities in Europe during the remaining nine days.
In 1975, petitioner earned no money as a research scientist, and had no clients or customers. While the was employed with Lockheed, he was never required to perform any research overseas.
In his notice of deficiency, respondent disallowed the $1,495 travel expense claimed by petitioner in connection with his trip to Europe in 1975. In addition, respondent disallowed $225 in expenses claimed by petitioner for tools, equipment and supplies, $135 for union dues, and $466 for professional books.
OPINION
The issue for decision is whether petitioner was carrying on a trade or business1983 Tax Ct. Memo LEXIS 313">*316 as a research scientist in 1975.
Petitioner contends that his travel expenses incurred in searching for technical dictionaries in 1975 improved his skills in translating foreign scientific literature and was helpful to his career as a research scientist.He maintains that he was actively employed as a research scientist until he was laid off in 1970 and that he hoped that these skills would assist him in securing future employment. Thus, petitioner claims that his expenses related to his profession and were deductible under section 162. Conversely, respondent contends that petitioner was not in the trade or business of a research scientist in 1975 since he had not been employed for the previous five years and had no definite intention to resume practice thereafter. Thus, respondent maintains, petitioner had no trade or business to support a business deduction in 1975. We agree with respondent.
Section 162(a) allows a deduction for ordinary and necessary business expenses. In order for an expenditure to be deductible as a business expense, the expense must relate to activities which amount to the present carrying on of an existing business.
Reisinger v. Commissioner, 71 T.C. 568">71 T.C. 568Koons v. Commissioner, 35 T.C. 1092">35 T.C. 109271 T.C. 568"> ;Reisinger v. Commissioner, supra at 572Ford v. Commissioner, 56 T.C. 1300">56 T.C. 1300487 F.2d 1025">487 F.2d 1025 (9th Cir. 1973);Corbett v. Commissioner, 55 T.C. 884">55 T.C. 884Although currently unemployed, a taxpayer can still be engaged in a trade or business if he or she was previously involved in and actively seeks to return to that trade or business.
Haft v. Commissioner, 40 T.C. 2">40 T.C. 2Furner v. Commissioner, 393 F.2d 292">393 F.2d 29247 T.C. 165">47 T.C. 165 (1966) and56 T.C. 1300"> (taxpayer who temporarily leaves job to attend school full time may be "carrying on a trade or business" while in school). Expenditures made in anticipation of resuming business at some indefinite future time, however, are not deductible.Ford v. Commissioner, supra Owen v. Commissioner, 23 T.C. 377">23 T.C. 377In the present case, petitioner1983 Tax Ct. Memo LEXIS 313">*318 was actively employed as a research scientist for 15 years for Lockheed before he was laid off in 1970. For the next two years, petitioner sought, but was unable to find, suitable employment in his field. In 1972, petitioner ceased searching for employment. Instead, he decided to "lay low for three years or more" conceding that he "didn't have any particular time in mind." From 1972 until 1975, he performed no work as a research scientist and indeed, had not been so employed at the time of trial. During those years, petitioner received retirement payments from Lockheed and earned some money from investments.
In light of the stipulated facts in the record along with petitioner's unequivocal testimony that he ceased looking for a position as a research scientist in 1972 and thereafter had no definite intention to resume employment in his field, we find that petitioner was not carrying on a trade or business in 1975.
Under limited circumstances, a taxpayer may be considered as being in a trade or business in a year in which no income is received from that trade or business.
Primuth v. Commissioner, 54 T.C. 374">54 T.C. 37440 T.C. 2"> 1983 Tax Ct. Memo LEXIS 313">*319 Thus, a taxpayer who temporarily ceases active participation in a trade or business during a transition period between leaving one position and obtaining another may be "carrying on a trade or business" during the transition period. SeeHaft v. Commissioner, supra. 40 T.C. 2"> InHaft v.Commissioner, supra. Haft, we held that a costume jewelry salesman who severed his connections with his supplier in September 1957 and who in 1958 was endeavoring to obtain a new source of costume jewelry to sell should be allowed to deduct those expenses properly referrable to his trade or business. We emphasized (40 T.C. 2">40 T.C. 6 ) that "petitioner did not cease to be in the costume jewelry business in 1957 and 1958 merely because he temporarily had no merchandise to sell." Rather, "[i]t was a period of transition in which he was actively seeking another connection that would enable him to continue to serve the same customers with whom he had previously dealt."Id. In the instant case, however, there is nothing in the record to indicate that in 1975, petitioner had any intention or definite plan to resume practice as a research scientist. In fact, petitioner testified that in 1978 he decided1983 Tax Ct. Memo LEXIS 313">*320 to retire since his income from investments made it unnecessary for him to search for employment. Even assuming that he had such intention in 1975 and that his search for technical dictionaries in Europe constituted an ordinary and necessary business expense, it would not be sufficient to sustain his travel expenditure. Expenses incurred to enable a taxpayer to resume the active conduct of his profession at some unspecified later date are not deductible.
Corbett v. Commissioner, 55 T.C. 884">55 T.C. 884Owen v. Commissioner, 23 T.C. 377">23 T.C. 377Frank v. Commissioner, 20 T.C. 511">20 T.C. 51140 T.C. 2"> , where we found that the calendar year 1957 was a reasonable period of transition.1983 Tax Ct. Memo LEXIS 313">*321 That petitioner still maintained his status as a research scientist in 1975 does not alter our decision. Membership in a profession does not necessarily mean that one is carrying on the trade or business of that profession.Haft v. Commissioner, supra at 6Reisinger v. Commissioner, 71 T.C. 568">71 T.C. 572Wyatt v. Commissioner, 56 T.C. 517">56 T.C. 517Rule 142(a), Tax Court Rules of Practice and Procedure. Accordingly, respondent's disallowance of these expenses is sustained.Decision will be entered for the respondent. Footnotes
1. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1954, as amended and in effect during the year at issue.↩
2. Petitioner's wife, however, did not file a petition herein.↩
3. As the period of time a taxpayer remains without connection to his former job or without any clear indication of an intention to actively carry on a trade or business increases, this begins to weigh as evidence that he is no longer "carrying on" his trade or business. Cf.
Canter v. United States, 173 Ct. Cl. 723">173 Ct. Cl. 723Corbett v. Commissioner, 55 T.C. 884">55 T.C. 884↩4.
Brooks v. Commissioner, 274 F.2d 96">274 F.2d 9630 T.C. 1087">30 T.C. 1087 (1958), relied upon by petitioner, is distinguishable. InBrooks, an accomplished research scientist claimed a deduction for travel and living expenses while she was in Europe doing research. The Ninth Circuit held that the taxpayer was engaged in a trade or business when she incurred these expenses. The court based its decision, in part, upon the following factors: (1) petitioner was required by her contract to engage in continuous research in order to maintain her position with the University of California; (2) the profit she had derived in previous years from her research, and her undisputed testimony that she expected to derive profit in the future; (3) the expenses were incurred in research which was her sole present activity and not for the purpose of securing another job; and (4) the many years spent by petitioner in similar research throughout the world.274 F.2d 96">274 F.2d at 99 . In the instant case, however, petitioner had no employment contract and no position to maintain. He indicated no definite plan or expectation of deriving future profit or securing future employment as a result of his travels. Additionally, petitioner testified that he was never required to travel to Europe while employed by Lockheed. Thus, the facts herein differ substantially from those in274 F.2d 96"> Brooks v. Commissioner, supra.↩
Document Info
Docket Number： Docket No. 3699-79.
Filed Date： 8/15/1983
Precedential Status： Non-Precedential
Modified Date： 11/20/2020