Commissioner v. Flowers

Background

A Mississippi lawyer who had lived with his family in Jackson since 1903 worked as general counsel for a railroad whose main office was in Mobile. He arranged to keep his home in Jackson and to pay his own travel and living costs between Jackson and Mobile. For 1939 and 1940 he deducted expenses for trips, meals, and hotel stays in Mobile. The Commissioner disallowed the deductions, the Tax Court agreed, the Fifth Circuit reversed, and the Supreme Court took the case because other courts disagreed.

Reasoning

The Court explained three requirements for the travel deduction: the cost must be reasonable and necessary, incurred while away from "home," and directly tied to the pursuit of business. The Tax Court found that these Mobile expenses did not further the railroad’s business; they resulted from the lawyer’s decision to keep a separate home in Jackson and were personal commuting costs. The Supreme Court therefore held the deductions were not allowable because the expenses lacked the required direct business connection.

Real world impact

The ruling makes it harder for people who live in one city and work in another to deduct travel and lodging unless their travel is required by the employer’s business. Employers’ unpaid arrangements that let employees split time between offices will not automatically create deductible business travel. The decision rests on the facts of this case and does not resolve every situation where "home" and "headquarters" differ.

Dissents or concurrances

Justice Rutledge dissented, arguing that "home" should mean a taxpayer’s actual residence and that these expenses fit the statute because the lawyer's trips were made to perform his work; he warned administrative rules should not rewrite ordinary words.