DocketNumber: Docket No. 7663-79
Citation Numbers: 76 T.C. 668, 1981 U.S. Tax Ct. LEXIS 141
Judges: Raum
Filed Date: 4/23/1981
Status: Precedential
Modified Date: 1/13/2023
*141
Petitioner, a retired U.S. Army officer, was employed by a Texas school district as a Junior ROTC instructor. The Federal Government paid petitioner his regular military retirement pay; pursuant to
*669 The Commissioner determined a $ 695 deficiency in petitioners' 1976 income taxes. The husband-petitioner (Col. Lyle) is a retired army officer who in 1976 served for 5 months as a Junior ROTC instructor in Odessa, Tex. At issue is whether a portion of the payments he received for such service under
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation of facts and related exhibits are incorporated herein by this reference.
At the time of the filing of their petition herein, petitioners were residents of El Paso, Tex. The principal issues herein relate*144 to the employment of Col. Lyle, and he will sometimes be referred to as "petitioner."
Petitioner retired from active U.S. Army service in 1974, and was a retired military officer during 1976. From June of 1974 to August 1, 1976, he resided in Oxford, Miss., with his wife and three children.
In July of 1976, the Ector County Independent School District offered petitioner a position as a Senior Army Instructor for the Junior Reserve Officers' Training Corps (ROTC) program at *670 Permian High School, Odessa, Tex. for the 1976-77 school year, beginning on August 2, 1976. Col. Lyle accepted this employment and drove to Odessa carrying his clothing and other personal effects. He took up residence in Odessa as of August 1, 1976, and lived in a furnished apartment for approximately 1 month. He subsequently lived with two other persons in a furnished mobile home for approximately 4 months. Mrs. Lyle and petitioners' children remained in their home in Mississippi throughout 1976. Petitioners' furniture likewise remained in Mississippi.
When petitioner left for Odessa, he expected to remain employed with the school district for at least the school year; he did not contemplate returning*145 to Oxford, Miss. However, in performing his duties at Permian High School, petitioner encountered problems with discipline of the students. 1 Some students complained to their parents, who in turn complained to the school principal. Despite petitioner's desire to "get this matter out in the open," the principal refused to reveal the names of the complainants. Thereafter, the regional commander, Brigadier General Childress, sent one Col. Rockhold to interview petitioner. In the course of the interview, petitioner "became rather outspoken with Colonel Rockhold," who then advised petitioner that he would recommend withdrawal of petitioner's certificate of eligibility to act as a Junior ROTC instructor. This would have resulted in the school district's termination of petitioner's employment. Petitioner's employment as a Junior ROTC instructor ended on December 31, 1976, although he continued to reside in Odessa until April 1, 1977.
*146 In 1976, petitioner received his regular military retirement pay and $ 5,134.53 in gross pay from the Ector County Independent School District. On their 1976 joint income tax return, petitioners claimed a miscellaneous itemized deduction of $ 1,775, which purported to be the amount petitioner received as a subsistence and quarters allowance while acting as a Junior ROTC instructor. The Commissioner determined that this amount was not a subsistence and quarters allowance excludable *671 from gross income under
Petitioners' 1976 return also claimed a total moving expense adjustment of $ 1,391. Most of this amount reflected transportation and temporary quarters expenses incurred in petitioner's move to Odessa. However, $ 304 of the total moving expenses reflected expenses incident to the sale of petitioners' former residence in Oxford, Miss. The Commissioner determined that no moving expense adjustment was allowable because petitioners "did not meet all*147 the requirements of
OPINION
1.
(b)
At issue herein is whether the pay petitioner received for serving as a Junior ROTC instructor included such nontaxable allowances, or whether it was instead merely an amount received as compensation*148 for services.
*149
The Reserve Officers' Training Corps Vitalization Act of 1964, Pub. L. 88-647,
(d) Instead of, or in addition to, detailing officers and noncommissioned officers on active duty * * * the Secretary of the military department concerned may authorize qualified institutions to employ, as administrators and instructors in the program, retired officers and noncommissioned officers * * * whose qualifications are approved by the Secretary*150 and the institution concerned and who request such employment, subject to the following:
(1) Retired members so employed are entitled to receive their retired or retainer pay and an additional amount of not more than the difference between their retired pay and the active duty pay and allowances which they would receive if ordered to active duty, and one-half of that additional amount shall be paid to the institution concerned by the Secretary of the military department concerned from funds appropriated for that purpose.
(2) Notwithstanding any other provision of law, such a retired member is not, while so employed, considered to be on active duty or inactive duty training for any purpose.
In implementing the statute, the Defense Department has issued directives, as well as regulations, 3 specifying the manner in which retired officers utilized as Junior ROTC instructors will be paid by the employing secondary school. Department of Defense Directive No. 1205.13(V)(B)(3) (Mar. 7, 1975) provides that secondary schools participating in the Junior ROTC program *673 agree to pay retired officers in accordance with the following procedures:
a. Retired personnel shall receive their*151 retired or retainer pay and an additional amount to be computed as the difference between such pay and the annual active duty pay and allowances for their pay grade, excluding hazardous duty pay, which they would receive if ordered to active duty.
b. The institution shall be considered the employing agency and shall pay the full additional amount due to the individual employee; one-half of the additional amount shall be refunded to the institution by the Secretary of the Military Department concerned from funds appropriated for that purpose.
c. The schedule of pay, the period of employment, and the terms of the employment contract will be at the discretion of the school system, provided that minimum requirements prescribed by this Directive are met.
Emphasizing the language in the statute and the Department of Defense directive specifying that the total compensation received by the retiree-instructors is to be the same as the amount "which they would receive if ordered to active duty," *152 petitioner argues that the statute and directive establish a notion of "equitable parity" in the compensation of retired and active duty instructors. Petitioner accordingly contends that he should be entitled to an exclusion from income equal to the quarters and subsistence allowances received by active duty personnel of the same rank, since otherwise the disposable income he would receive from serving as a Junior ROTC instructor would be less than an active duty officer performing identical tasks. The Government contends that only active duty military personnel receive subsistence and quarters allowances which are excludable from gross income. Since
An initial difficulty with petitioner's*153 contentions is the source of the payments he received. Aside from his regular retired pay, which he was entitled to receive regardless of whether he performed any services, petitioner received no other compensation or allowances from the Federal Government. Indeed,
Although the Federal Government reimburses the school districts for one-half the "additional amount" paid to the retired officers, the responsibility for disbursing these funds and determining the ultimate amount of the retired officers' compensation*155 rests with the employing school. Since the school, and not the Federal Government, is the employer, it is difficult to see how any compensation petitioner received from the school could be considered a subsistence or quarters allowance received from the Federal Government. We find that while petitioner served as a Junior ROTC instructor, his sole employment relationship was with the Ector County School District and that he did not receive any nontaxable quarters or subsistence "allowances" from the district.
Moreover, we think that Congress never intended to pay any nontaxable "allowances" to retired officers serving as Junior ROTC instructors. Officers entitled to "basic pay" are entitled to a basic allowance for subsistence, in lieu of the provision of *675 meals in kind, and a basic allowance for quarters, unless quarters provided by the military are occupied by the officer. See
The statute provides that retired officers are to receive their customary retired pay "and an additional amount of not more than the difference between their retired pay and the active duty pay and allowances which they would receive if ordered to active duty, and one-half of that additional amount shall be paid to the institution concerned by the Secretary."
Further support for the*158 conclusion reached above on the basis of the statutory language is afforded by the legislative materials relating to the ROTC Vitalization Act. The legislative history does not suggest that Congress intended to establish "parity" between active duty and retired officers serving as Junior ROTC instructors; instead, retired officers were to be utilized in order to permit expansion of the Junior ROTC program at a lesser cost and with fewer drains on active duty military strength than would be required if the program were staffed by active duty personnel. At the time the legislation was considered, retired armed forces personnel were entitled to receive retired pay of between 50 and 75 percent of their basic pay. See S. Rept. 1514, 88th Cong., 2d Sess. (1964), reprinted in [1964] U.S. Code Cong. & Adm. News 3943, 3944; H. Rept. 925, 88th Cong., 1st Sess. 24 (1963). The additional payment from the employing school, partly funded by the Defense Department, was intended by the proponents of the legislation to facilitate the employment of retired personnel in the Junior ROTC program. See 110 Cong. Rec. 22975-22976 (1964) (remarks of Senator Russell). Considerable cost savings were envisioned*159 by the sponsors of the legislation; if retired personnal drawing 75 percent of their active duty pay could be induced to serve, the Government could obtain the services of a retired officer for an additional expenditure of only 12 1/2 percent of the cost of pay and allowances of a comparable officer on active duty. 5 See 110 Cong. Rec. 14686 (1964) (remarks of representative, Hebert). Thus, it appears that the "additional amount" paid to retired officers was not intended to provide either basic pay or allowances to reimburse retired officers serving as Junior ROTC instructors for their costs for meals and quarters. Instead, the "additional amount" was designed as an incentive payment to induce retired personnel to accept employment as Junior ROTC instructors so that the Government could realize economies in staffing the Junior ROTC program. Accordingly, the "additional amount" petitioner received from the school district was clearly in the nature of compensation, rather than a nontaxable *677 quarters and subsistence allowance. Certainly, nothing in the legislative history called to our attention even remotely suggests that a portion of the retired officer's compensation*160 is to be treated as nontaxable.
In light of the statutory language, as well as the legislative history, we find that petitioner received no nontaxable quarters or subsistence allowances as a result of his employment as a Junior ROTC instructor in 1976. Accord,
Petitioner argues that
Petitioner also contends that the Government's position involves violations of his rights under various constitutional provisions. We find the point to be without merit. His principal complaint is that because he receives no nontaxable quarters and subsistence allowances, he receives less pay after taxes than comparable active duty officers serving as Junior ROTC instructors. However, "a legislative classification will not be set aside if any state of facts rationally justifying it is demonstrated to or perceived*163 by the courts."
2.
The Government has conceded that of the remaining $ 304 of petitioner's claimed moving expense deduction, he is entitled to deduct $ 60 as an advertising expense incident to the sale of petitioners' residence. Petitioner contends that the remainder of the $ 304, which purportedly represents his expenses of travel between Odessa and Oxford, Miss., in December of 1976 to arrange for the sale of petitioners' residence, *165 is properly deductible as a moving expense. However, deduction of such travel expenses is not allowable under
*166 In light of our finding that petitioner is entitled to a moving expense deduction for bona fide expenses incident to his move to Odessa in 1976, we need not address petitioner's alternative contention that his living expenses in Odessa are deductible as expenses incurred while "away from home."
1. Petitioner also had disagreements with the school officials with respect to the withholding of taxes on the portions of his salary that he perceived to be nontaxable quarters and subsistence allowances. However, these disagreements did not precipitate the termination of petitioner's employment.↩
2. The exclusions for subsistence and quarters allowances were authorized by Treasury regulations and rulings in 1925 and 1926. See
3. See
4. Department of Defense Directive 1205.13(V)(B)(4) (Mar. 7, 1975) provides that the employing institution shall:
"Contract separately with individual Junior ROTC instructors for any additional duties desired by the institution beyond those connected with the instruction, operation, and administration of the Junior ROTC program at no cost to the Military Department. Such additional services must be performed outside the scope of Junior ROTC duties and hours. (This does not preclude ROTC instructors from serving on routine committees or performing other extra-curricular duties normally performed by other faculty members.)"↩
5. The Federal payment to the school district would of course be correspondingly higher for retirees receiving retirement pay of less than 75 percent of their active duty pay.↩
6.
(7)
(i) Expenses incident to the sale or exchange by the taxpayer or his spouse of the taxpayer's former residence which * * * would be taken into account in determining the amount realized on the sale * * * of the residence. These expenses include real estate commissions, attorneys' fees, title fees, escrow fees, so-called "points" or loan placement charges which the seller is required to pay.↩