Brief Fact Summary. Edward Andrews sought a re-determination from the Tax Court after the Commissioner did not allow him to deduct personal living expenses related to a second business. He lived and worked in Massachusetts building pools part of the year, and lived and worked racing and breeding horses in Florida during the rest of the year.
Synopsis of Rule of Law. Taxable income should not include the cost of producing that income.
The purpose of allowing the deduction of living expenses while a taxpayer is away from home is to mitigate the burden of the taxpayer who, because of the exigencies of his trade or business, must maintain two places of abode and thereby incur additional and duplicate living expenses.View Full Point of Law
Issue. Did the Tax Court improperly affirm the disallowance of the expenses incurred in Florida by considering those to be personal expenses?
Held. Circuit Judge Campbell issued the opinion for the United States First Circuit Court of Appeals in vacating the ruling of the Tax Court, and holding that the living expenses incurred while on business at the Florida house should have been an allowable deduction.
Discussion. The Court of Appeals found that duplicated living expenses caused by business may be deductible. Andrews was required to travel and incur personal living expenses because of a secondary employment, and those expenses were “a cost of producing income.”