The opinion of the court was delivered by: BONSAL
Plaintiff Ethel Merman Six (Miss Merman) brought this action for the refund of income taxes paid by plaintiffs in the year 1959. The Internal Revenue Service disallowed in plaintiffs' joint 1959 income tax return deductions of $20,625.84 for living and traveling expenses, and $6,173.00 for gowns, cosmetics, accessories and expenses of a similar nature, allegedly incurred while Miss Merman was performing in "Gypsy" in New York. Miss Merman paid the tax and brought this action. The government moves for partial summary judgment, pursuant to F.R. Civ. P. 56(b), dismissing the claim for refund of these items.
Miss Merman, a well-known actress, resided in New York City until 1953. In that year she married Robert F. Six of Denver, Colorado, who was president of Continental Airlines and director of a Denver bank, and became a resident of Colorado. Miss Merman and her husband resided in an exclusive area of Englewood, Colorado. Their home was in the $100,000 class, and required substantial upkeep, most of which was borne by Miss Merman. Their two children lived with them and attended local schools prior to entering prep school in New York and college in Colorado.
Until Miss Merman began rehearsals in "Gypsy" in February of 1959 in New York, she had been appearing on occasional television programs. Miss Merman's contract for "Gypsy" was for the run of the play, but was not to exceed two years, and she states that she did not intend to stay with "Gypsy" for more than two years. She states she could not be sure of the success of "Gypsy," and that her stay in New York was "temporary."
"Gypsy" opened in Philadelphia in April and in New York in May, and was a hit; it closed in New York at the end of 1960, and Miss Merman then went on the show's road tour. Around this time Miss Merman and Mr. Six were divorced.
While Miss Merman was appearing in "Gypsy," her husband and children remained in Denver. She took a year's lease, which she renewed, on an apartment at the Park Lane Hotel in New York, at an annual rent of $25,000. Miss Merman claims that she visited Denver four times during this period, while the government concedes only two visits. Her only employment in 1959 was in New York City.
The Internal Revenue Code of 1954, § 262, 26 U.S.C. § 262, which provides:
"Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses"
bars deduction of living and traveling expenses, unless they are deductible under Int. Rev. Code of 1954, § 162(a)(2), which provides:
"(a) In general. - There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including -
(2) traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business."
It is the government's position that "home" for the purposes of § 162(a)(2) was Miss Merman's principal place of doing business in 1959, New York City, where she lived while performing in "Gypsy," and that therefore her living and traveling ...