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McDonell v. Commissioner

Citation. McDonell v. Commissioner, T.C. Memo 1967-18, 26 T.C.M. (CCH) 115, T.C.M. (RIA) 67018 (T.C. Jan. 31, 1967)
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Brief Fact Summary.

Petitioner and his wife were required to go on a trip to Hawaii to supervise other employees. The other employees had been awarded the trip in return for highly successful sales. Petitioner on the other hand, while chosen out of a drawing, was required to go and had a list of duties and obligations to perform for the employer.

Synopsis of Rule of Law.

Trips given to employees for the purposes of carrying out duties required of their employment is not gross income of the employee.


Petitioner, Allen McDonell, was employed by Dairy Equipment Co. (“DECO”). Petitioner and his wife went on a trip to Hawaii awarded to employees for successful sales. Petitioner and his wife went essentially to supervise the other employees who won the trip. While they would have been excused for good reasons, DECO had a list of duties and requirement for them to comply with while on the trip. The wife was required to go as well. There were no business activities on the trip other than one day devoted to a sales meeting. The cost of the trip attributable to Petitioner and paid by DECO was $1,121.96. Petitioner reported $600 as miscellaneous commissions on his 1960 tax return as the estimated cost to DECO of his wife going on the trip. The Commissioner determined a deficiency, and Petitioner now seeks a refund for the $600 that was reported.


Whether all or any portion of the trip expenses paid for by Petitioner’s employer are included in gross income?


Judge Tannenwald issued the opinion for the Tax Court of the United States in holding for Petitioner and finding that the expense of the trip was not gross income.


The Tax Court noted that the Petitioner was essentially required to go, and that he and his wife were not able to do many of the tourist activities while on the trip. Other employees similar situated were not given a trip or a substitute award or benefit. Rather, Petitioner’s employer intended for him to go on the trip to serve a business purpose, and not as a vacation.

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