Allen J. Mcdonell

26 T.C.M. 115 (1967)

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Nature of the Case

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Facts

McDonell (P) was employed by Dairy Equipment Company as an assistant sales manager from 1956-60. When P was hired, P's wife was also interviewed to make sure that she understood that considerable travel was required as part of the job. Wives were also looked at to determine if they were fit to discharge social responsibilities required in connection with company business activities. A sales incentive contest was started in 1959, and the prize for qualifying was a trip to Hawaii for each winner and his wife. Home office salesmen were not allowed to participate, and P was a home office salesman. There were 11 winners, and of the 11, 10 decided to take the trip. At the time of initiating the contest, management decided to send one home office salesman and his wife for each of three contest winners. This decision was based on the fact that they did not want the trips turning into complaint sessions that hurt company business. The home office salesmen were selected by lot. Those selected to go received no cut in pay and did not lose vacation time and were told to consider the trip a business trip. Their objective was to entertain their clients, and the inclusion of the wives was considered mandatory as it was found to be impossible for stag salesmen to host a trip for couples. P was one of four chosen. Besides a day chosen for a sales meeting there were no direct business activities conducted on the trip. P performed as expected and their time was taken up in entertaining their guests with no time for shopping or swimming or privacy. The IRS determined that the trip cost $1,121.96 and P reported about half that for his wife's presence on the trip. The IRS wanted the entire trip reported as income and assessed $246.83 and $12.34. This case was presented to the tax court.