Masonry Magazine August 1969 Page. 19
TAXES
By MIRIAM McD. MILLER
POLITICAL CONTRIBUTIONS
The IRS has again reaffirmed its position with regard to political contributions. Generally, there are no circumstances under which contributions made to a political candidate or party are deductible.
In a recent case, a stone products company claimed a business deduction for various amounts it had spent on tickets for dinners and outings sponsored by local political committees and associations. These tickets were usually distributed to the customers of the company.
However, the Tax Court ruled against these deductions on the ground that there was no evidence that established a relationship of these expenditures to the taxpayer's business. And, furthermore, the court ruled that even if there were such a relationship the very nature of the expenditures for obviously political purposes was sufficient reason to deny their deductibility. Lancaster Stone Corp. v. Com'r. T. C. Memo 119.
WIFE'S TRIP
Along with the growing trend of many major companies to pay the expenses for the employee's wife to accompany him on certain business trips, the IRS is following, at a somewhat slower pace, with a recognition of the business benefits of such trips.
Should a company pay for a wife's trip, the question arises whether the amount paid is taxable to her husband as compensation. And, where the taxpayer pays for the wife's travel expenses, the question becomes is the payment deductible as a business expense.
In order to get a tax break on such a trip, a real business purpose for a wife's presence on a business trip must be shown. The purpose might be to help her husband establish a close, friendly relationship with customers, etc. or to help entertain customers or business associates and their wives. Fortunately, the IRS has indicated that so long as there is a genuine business purpose to the wife's trip, it is immaterial that she may also have enjoyed the trip.
RELIGION V. TAXES
The Tax Court did not agree with the taxpayer that he should be exempt from tax on self-employment income because in accordance with his religion he should not engage in life insurance. The court noted that the legislature, in providing for the general welfare, may impose indirect burdens on the free exercise of religion. And, while the Social Security Act may be such an indirect burden it is not unconstitutional. Palmer v. Com'r, 52 TC No. 36.
OWNER-EMPLOYEE PLAN
Under the income tax laws a qualified plan that involves an owner-employee must not permit benefits to be paid to such owner-employee before he attains the age of 59½ or becomes disabled. It should be noted that the law does not preclude the distribution of a deceased owner-employee's interest to his estate prior to the time that the owner-employee would have attained the age of 59½ had he lived.
The IRS was recently asked by an insurance company whether a plan would qualify if it does not contain an affirmative restriction against a premature distribution. The problem apparently came into existence because there was a state law that requires an insurance company to pay to an insured, upon request, the cash surrender value of an insurance policy.
The IRS ruled that to satisfy the income tax laws a plan must contain a direct statement in the master plan that prohibits payment prior to the time the owner-employee attains the age of 59½ years, becomes disabled, or dies. The IRS explained that upon signing the joinder agreement with respect to a plan that contains the appropriate affirmative statement the owner-employee specifically commits himself not to seek an earlier repayment. Accordingly, the IRS ruled that the master plan involved here did not qualify as it did not contain the needed affirmative restriction. Rev. Rul. 69-313.
RIOT LOSS
A taxpayer scheduled a reception to which many persons were invited. Due to a civil disturbance in the city that day, the mayor imposed a curfew and the taxpayer postponed his reception. However, the food that had been delivered to the reception hall, being of a perishable nature, had to be discarded.
The taxpayer sought an IRS ruling on whether he could deduct the cost of the food that had to be discarded by him as a casualty loss.
The IRS ruled he could not. "The food in the instant case was not physically damaged or destroyed by the civil disturbance or curfew, but rather was discarded due to its perishable nature and the inability of the invitees to attend the reception." Rev. Rul. 69-354.
EMPLOYER'S CAR
Here is another tough ruling. The Commissioner determined that a taxpayer had received income in the amount of $413 because he had the unrestricted use of his employer's car during the taxable year. The employer paid all of the car's insurance and inspection costs. The taxpayer did not try to disprove the fact that he had had the free use of the employer's car. However, the taxpayer was able to prove that the Commissioner did not similarly tax other employees who had use of employer-owned cars. But, the court still ruled against the taxpayer and stated that: "It is settled that favorable treatment of another taxpayer is no defense to a taxpayer against whom a deficiency has been assessed." Vierling, Jr. v. Com'r., T. C. Memo 116.
AVIATION TAXES
The Nixon Administration, among its tax proposals, has a request that Congress establish a new schedule of air transportation taxes for use solely to finance and improve air transportation facilities and programs. In 1970, these additional taxes would increase the taxes from this source from $295 million to some $596 million. The new tax schedule would include (1) an 8% tax (now 5%) on airline tickets for domestic flights, (2) a tax of $3 on passenger tickets for most international flights that begin
(Continued on page 23)
19