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.
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)
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.