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COMMISSIONER INTERNAL REVENUE v. ROBERT M. AND SALLY L. BILDER. ROBERT M. AND SALLY L. BILDER (04/07/61)

decided.: April 7, 1961.

COMMISSIONER OF INTERNAL REVENUE, PETITIONER,
v.
ROBERT M. AND SALLY L. BILDER. ROBERT M. AND SALLY L. BILDER, PETITIONERS, V. COMMISSIONER OF INTERNAL REVENUE.



Author: Kalodner

Before McLAUGHLIN, KALODNER and HASTIE, Circuit Judges.

KALODNER, Circuit Judge.

Are rental payments for an apartment during a winter's stay in Florida, incurred, as the Tax Court of the United States found, "as a medical necessity and as a primary part of necessary medical treatment of a disease from which petitioner [taxpayer] was and still is suffering", deductible as a "medical expense" under Section 213 of the Internal Revenue Code of 1954, 26 U.S.C. § 213?

That is the primary question presented by the Commissioner of Internal Revenue's petition for review (No. 13,293) of the Decision of the Tax Court of the United States*fn1 which answered it in the affirmative.

The issue is novel in the sense that it has never been decided by the appellate courts of the United States. It must immediately be noted that the Commissioner concedes that under the "medical expense" provisions of Section 23(X) of the Internal Revenue Code of 1939, as added in 1942, 26 U.S.C. § 23(X), predecessor to Section 213 of the 1954 Code, the rental payments at issue were allowable deductions. As will subsequently be developed, the Commissioner contends that the effect of the 1939 Code provisions was changed by the addition of Section 213 (e) (1) (B) so as to narrow "the scope of the medical deduction so as to allow only transportation expenses for travel prescribed for health", and to preclude rental expenses.

The petition for review (No. 13,294) of Robert M. Bilder ("taxpayer")*fn2 presents a secondary issue as to whether the Tax Court correctly limited his rental deduction, as will subsequently appear.

The critical facts as found by the Tax Court and not here disputed may be summarized as follows:

In 1954 taxpayer was engaged in the practice of law in Newark, New Jersey. He resided in a nearby town with his wife and three-year old daughter. He was then 43 years old. He had earlier suffered four coronary occlusions resulting in myocardial infarctions which restricted the flow of blood to his heart. The occlusions were suffered in the course of the disease of atherosclerosis which afflicted taxpayer.

"One of the most eminent heart specialists in the United States if not the world" advised taxpayer in December 1953 that he spend the winter months in a warm climate as part of the treatment of his disease and in order to prevent further heart attacks.*fn3 Taxpayer, his wife and infant daughter went to Fort Lauderdale, Florida which afforded the warm climate advised by his heart specialist. He rented an apartment there between January 1, 1954 and March 24, 1954 at a rental of $1500.00, which was less than the cost of a single room in a hotel. The apartment was in close proximity to a Fort Lauderdale hospital which had facilities to test taxpayer's blood to determine the correct dosage of an anticoagulant drug known as Dicumerol. One of the few doctors in Florida competent to supervise taxpayer's use of Dicumerol - then in limited use - practiced in Fort Lauderdale and taxpayer was under his care.

Taxpayer also rented an apartment in Fort Lauderdale from December 15, 1954 to February 10, 1955 at a rental for the period of $829.00. His wife and daughter accompanied him.

Taxpayer in his 1954 and 1955 income tax returns deducted as "medical care" expenses the respective Florida apartment rentals and $250.00 each year for transportation between Newark, New Jersey and Fort Lauderdale. The Commissioner disallowed the stated deductions and taxpayer resorted to the Tax Court which allowed the deductions claimed for transportation but only one-third of the apartment rentals, because of its view that "From the record we are unable to conclude that having his family in Florida with him was necessary as a part of the treatment of his disease."

Following the filing of the Tax Court's Findings of Fact and Opinion on October 26, 1959, taxpayer moved for leave to submit additional testimony on the score of the "medical necessity" of having his wife share his apartment with him in Florida, and appended thereto an affidavit of his medical expert to that effect. The Tax Court denied taxpayer's motion on November 6, 1959 and subsequently, on December 29, 1959 filed its Decision.

Taking first the issue presented by the Commissioner's petition for review as to whether rental payments of the nature here involved are allowable deductions as a "medical expense" under Section 213 of the Internal Revenue Code of 1954:

It may be noted, preliminarily, that the Commissioner does not challenge the Tax Court's factual finding that it was necessary for the "medical care" of taxpayer that he winter in Florida. Nor does the Commissioner dispute that under Section 23(X) of the 1939 Revenue Code "nonhospital meals and lodging, incurred primarily for and essential to medical care" were allowable as "expenses of medical care".

The crux of the Commissioner's position, as he puts it, "is essentially that * * * lodging expenses are nondeductible personal living expenses, and that Section 213 of the 1954 Code * * * by expressly authorizing a deduction for transportation expenses, necessary to medical care, excludes allowance for lodging or meals." Section 23(X) of the 1939 Code, it may be noted, did not make specific provision for the deduction of transportation expenses but they were allowed by judicial construction of Section 23(X), with the acquiescence of the Commissioner.

The provisions of Section 23(X) of the 1939 and Section 213 of the 1954 Code, other than with respect to the deductibility of transportation expenses, are identical. To afford a ready comparison they are set forth in adjacent columns as follows:

1939 Code

" § 23. Deductions from gross income. In computing net income there shall be allowed as deductions:

"(X) Medical, dental, etc., expenses. Expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse or a dependent. * * *

"The term 'medical care,' as used in this subsection, shall include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (including amounts paid for accident or health insurance). * * *"

1954 Code

" § 213. Medical, dental, etc., expenses

"(a) Allowance of deduction. - There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent * * *.

"(e) Definitions. - For purposes of this section -

"(1) The term 'medical care' means amounts paid -

"(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (including amounts paid for accident or health insurance), or

"(B) for transportation primarily for and essential to medical care referred to in subparagraph (A)."

The Commissioner's contention is that "the express proviso [subparagraph (B) ] allowing only transportation costs suggests that Congress intended to limit the deduction for expenses of travel to exclude the costs of meals or lodging as allowable expenses includible in 'medical care'." (Emphasis supplied.)

In apparent recognition that he is leaning on the most slender of reeds in this respect, the Commissioner further resorts to the House and Senate committee reports which state that subparagraph (B) "clarifies existing law in that it specifically excludes the deduction of any meals or lodging while away from home receiving medical treatment." It may be added that Treasury Regulations on Income Taxes (1954 Code), Section 1.213-1(e) (1) (iv) so provide.*fn4

At this juncture it should be stated that the Tax Court in the instant case refused to consider the House and Senate reports stating:

"In view of the clarity of the wording of section 213 of the 1954 Code, we see no reason to resort to congressional history for its meaning."

To the foregoing must be added that the Tax Court in Carasso v. Commissioner, 1960, 34 T.C. 1139, reviewed by the Court, with one judge concurring in the result and two dissenting, "disapproved" of its failure to examine legislative history in the instant case. The Tax Court, however, did not disapprove or repudiate the allowance of transportation and partial apartment rental made here, indicating that it construed the legislative history to permit allowance of living expenses in proper cases. That indication is buttressed by the fact that in disallowing living expenses in Carasso to a taxpayer who, on his doctor's advice, following two operations in which the major portion of his stomach was removed, took a nine-day trip to Bermuda for convalescence, the Tax Court expressly stated "We express no opinion as to whether meals and lodging expenses might be deductible in other circumstances." (Emphasis supplied.)

The sum of taxpayer's view is that Section 213(e) (1) (A) defines "medical care" in the same terms as Section 23(x) and since the latter permitted deductions for lodging expenses (apartment rental here), Congress, by re-enacting its language into Section 213(e) (1) (A), provided for the continuance of such deductions; further, had Congress intended to make lodging expenses (and meals) nondeductible in the 1954 Code it could have so specified in Section 213, and finally, the congressional committee reports "contain ambiguities and, if literally applied, produce absurd results."

This summation of the views of the parties may appropriately be made at this juncture:

Both agree, as earlier stated, that Section 23(x) of the 1939 Code permitted allowance of rental payments as "medical care" in proper cases.*fn5 Further, both agree that Section 213(e) (1) (A) of the 1954 Code defines "medical care" in the same terms as Section 23(x) of the 1939 Code. The Commissioner, however, is of the view that "on its face" the additional definition of transportation costs as "medical care" in subparagraph (B) of Section 213(e) (1) "suggests" a statutory exclusion of lodging and meal*fn6 expenses incurred while receiving "medical care" away from home (except where paid as a hospital bill). He further urges that the House and Senate committee reports relating to subparagraph (B)*fn7 "expressly" state that it makes such an exclusion, and that the impact of the legislative history requires us to construe (B) to effect such a result.

We need not be detained by the Commissioner's view that subparagraph (B) "on its face" "suggests" the limitation which he urges, or a congressional intent to effect it. Indeed "on its face", subparagraph (B), by its explicit terms, extends the deduction allowances for "medical expenses" to include "transportation primarily for and essential to medical care referred to in subparagraph (A)."

That brings us to the Commissioner's contention that the legislative history of subparagraph (B) requires a judicial construction that it effects the limitation which he urges.

Since in our view there is nothing in the terms of (B) which effects the limitation urged, the sum total of the Commissioner's position is that what is dispositive of the issue is not what the statute provides but what the legislative history says; otherwise stated, a statute can be nullified to the extent of repeal by its legislative history.

The Commissioner has not cited to us any precedent for his concept on this score nor has an exhaustive research on our part disclosed any judicial support for it.

The Supreme Court has time and again had occasion to consider vexing problems involving statutory construction. Earlier decisions indicated that where the terms of a statute are clear and unambiguous there is no requirement to consider legislative history in their construction, giving rise to what has been called the "plain-meaning rule."*fn8 That "rule" however has given way in recent years to the present teaching that legislative history will be examined by the courts "* * * to see whether that [it] raises such doubts that the search for meaning should not be limited to the statute itself." Association of Westinghouse Salaried Employees v. Westinghouse Elec. Corp., 1955, 348 U.S. 437, 444, 75 S. Ct. 489, 492, 99 L. Ed. 510.*fn9 In Territory of Alaska v. American Can Co., 1959, 358 U.S. 224, 226-227, 79 S. Ct. 274, 3 L. Ed. 2d 257 it was said that courts will take "judicial notice" of legislative history.

We come now to consideration of the legislative history of subparagraph (B) and its asserted impact on (B) and the related provisions of Section 213.

Applicable to such consideration are these well-settled principles of statutory construction.

"Like other extrinsic aids to construction, their [legislative history] use is to 'solve, but not to create an ambiguity'", United States v. Shreveport Grain & El. Co., 1932, 287 U.S. 77, 83, 53 S. Ct. 42, 44, 77 L. Ed. 175.

Legislative history of a statute may not be taken as giving to it "a meaning not fairly within its words", St. Louis, I. M. & S. Ry. v. Craft, 1915, 237 U.S. 648, 661, 35 S. Ct. 704, 707, 59 L. Ed. 1160; nor add new terms to it, United States v. Shreveport Grain & El. Co., supra.

"In expounding a statute, we must * * * look to the provisions of the whole law, and to its object and policy," United States v. The Heirs of Boisdore, 1850, 8 How. 113, 122, 12 L. Ed. 1009; a construction that "would produce incongruous results" is to be avoided, Mastro Plastics Corp. v. N.L.R.B. 1956, 350 ...


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