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's expenses.
  • 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 McDonell.
    • 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.