Under the general provision of 26 U.S.C.S. § 162(a), no deduction is allowed for expenses incurred in preparing to enter a new business and the phrase in the pursuit of a trade or business has in cases concerned with such expenses been read to presuppose an existing business with which the taxpayer is connected.
Appellee taxpayer reported earnings from her summer employment and deducted the cost of transportation between Boston and New York, the cost of a small apartment in New York, and meals in New York. The deductions were taken under 26 U.S.C.S. 162(a)(2). The tax court allowed the deductions, and appellant Commissioner of Internal Revenue sought review.
For the purposes of taxation, was the appellee taxpayer allowed to take deductions for transportation and living expenses from her taxable income, when she lives in New York and the expenses were incurred during a summer employment in Boston?
The Court determined that appellee's home for purposes of 26 U.S.C.S. 162 (a)(2) was New York and that the expenses at issue in this case were not incurred while away from home. Therefore, the Court reversed the tax court's ruling.