CHARLEY V. COMMISSIONER 91 F.3d 72 (1996) CASE BRIEF

CHARLEY V. COMMISSIONER

91 F.3d 72 (1996)

NATURE OF THE CASE: This was a dispute over the tax status of travel credits. Charley (P), taxpayers, challenged a decision of the Tax Court, which held that travel credits constituted taxable income.

FACTS: Truesdail labs was engaged in the testing business including testing urine for horse racing and in the investigation of industrial accidents. Charley (P) was president of Truesdail and owned 50.225% of its shares. P performed various services for the corporation including inspecting mechanical devices suspected of failure. P traveled to various accident sites to inspect machinery. The company's unwritten policy was that frequent flyer miles that were earned during employer related trips were the sole property of the employee. From the facts of this case it was determined that P would book first class flights and bill the client for first class flights but actually took coach flights that were upgraded to first class. P would then tell his travel agent to transfer funds to his personal account amounting to the difference in price between a first class ticket and that of a coach ticket. In 1988, P got $3,149.93 in monies from this scheme. Eventually, P was called on the carpet and assessed $882 and $44 in penalties. The tax court held that the travel credits constituted taxable income. This appeal resulted.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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