Rosenspan v. United States
438 F.2d 905 (2d Cir. 1971)

  • Rosenspan was a traveling salesman. He traveled a lot. He was often on the road for 300 days per year. The rest of the time he spent at his brother's house in NYC, or in a hotel near his home office (also in NYC).
    • He registered to vote using his brother's address, but didn't keep many belongings there and he didn't consider it to be a permanent home.
      • His car was registered at his cousin's house in Ohio.
  • Rosenspan filed his taxes, claiming an exemption for qualified meals and lodging.
    • 26 U.S.C. 162(a)(2) allows a deduction for unreimbursed expenses for meals and lodging incurred "while away from home or in the pursuit of a trade of business."
  • The IRS denied the deduction. Rosenspan appealed.
    • The IRS argued that since Rosenspan didn't have a home, he could never be 'away from home'. Therefore, he wasn't entitled to a deduction under 162(a)(2).
    • Rosenspan argued that his business office should be considered his 'home' for 162(a)(2) purposes.
  • The Trial Court found for the IRS. Rosenspan appealed.
  • The Appellate Court affirmed.
    • The Appellate Court looked to Commissioner v. Flowers (326 U.S. 465 (1946)) which said that there were three conditions that must be met to claim a deduction under 162(a)(2):
      • The expenses must be reasonable and necessary traveling expenses.
      • The expense must be incurred while away from home.
      • The expense must be incurred in the pursuit of business.
    • The Court pointed to Flowers, Commissioner v. Peurifoy (358 U.S. 59 (1958)), and Commissioner v. Stidger (386 U.S. 287 (1967)), which were 3 US Supreme Court cases that all found that a business office is not a 'home' 162(a)(2) purposes.
      • Interestingly, in all three of those cases, it was the IRS that was arguing that a business office was a home.
    • The Court found that based on those cases, and a plain language reading of the term 'home' in the Statute, Rosenspan had no home to be away from, and so was not allowed to take a deduction under 162(a)(2).
  • The basic idea behind 162(a)(2) is that if a person has to duplicate their living expenses because of business, they are entitled to deduct the cost of the second set of living expenses.
    • So if you have a house, but are forced to also pay for a hotel because you are traveling for work, that's a duplicate living expense.
    • By the same logic, Rosenspan didn't have a house, he only had a hotel room, so there was no duplication of expenses, hence, no deduction.