Allen J. McDonell v. Commissioner
26 T.C.M. 115 (Tax Ct. 1967)
McDonell worked as a sales
manager for a company called DECO. As part of a sales incentive, DECO
sent salesmen who made their quotas on a vacation to Hawaii. They
randomly chose McDonell (and his wife) from the list of sales managers and
told him to go as well, to keep an eye on things.
DECO paid $1121 for the
McDonell filed his tax forms
and reported about half ($600) of the trip cost.
McDonell initially figured
that his half of the trip wasn't reportable because he was required to
go, only his wife's half was.
The IRS stepped in and said
that the entire $1121 should be counted as gross income. McDonell objected.
The IRS argued that the cost
of the trip was reportable under 26 U.S.C. §61, or alternately that it was reportable under 26
U.S.C. §74 as an award.
McDonell argued that it
wasn't an award, it was a requirement of his job.
He also changed his mind as
asked for his wife's expenses to be deducted as well.
The Tax Court found for
The Tax Court found that
while the salesmen's costs were covered as awards under §74, McDonell's were not.
McDonell wasn't given the
trip as an award, he was told to go as part of his duties. The fact
that he enjoyed it was irrelevant.
The Court found that none of
the $1121 was attributable to McDonell because it wasn't an award or compensation.