John J. Hanna v. Commissioner of Internal Revenue

Citations: 763 F.2d 171; 56 A.F.T.R.2d (RIA) 5117; 1985 U.S. App. LEXIS 20693Docket: 81-2122

Court: Court of Appeals for the Fourth Circuit; May 31, 1985; Federal Appellate Court

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In the case of John J. Hanna v. Commissioner of Internal Revenue, the United States Court of Appeals for the Fourth Circuit addressed the appeal from the Tax Court's decision regarding tax deductions claimed by Hanna, a nonresident alien professional hockey player, for the 1971 tax year. The Tax Court, led by Judge Goffe, had previously disallowed certain allocations and deductions in consolidated cases involving Hanna and another player, Stemkowski. 

Key issues included whether salaries covered not only regular season services but also off-season, training camp, and playoff periods, affecting the sourcing of income. Other deductions in question were off-season conditioning expenses, traveling expenses, and various miscellaneous expenses. The Fourth Circuit found that the claims raised by Hanna were addressed in the earlier decision by the Second Circuit in Stemkowski, which upheld the Tax Court's denials of similar claims.

Specifically, Hanna's claims for deductions related to living expenses in the U.S., promotional expenses, state sales taxes, disability insurance, and general newspaper costs were all denied based on the reasoning provided in the Stemkowski case. The Fourth Circuit affirmed the Tax Court's opinion regarding these issues, agreeing with the conclusions drawn by Judge Oakes. The Tax Court had also suspended decisions in 41 related cases pending the outcomes of Hanna and Stemkowski's appeals.

Two claims made by Hanna necessitate remanding the case to the Tax Court, as outlined by Judge Oakes in Stemkowski's appeal: 

1. Hanna must provide further substantiation and allocation of off-season conditioning and training camp expenses between Canadian and U.S. income sources.
2. The Tax Court must reconsider Hanna's purchases of trade journals.

Additionally, there are questions in Hanna's appeal not raised in Stemkowski's appeal:

1. The Tax Court's denial of travel expenses for out-of-town games is affirmed due to insufficient substantiation, following Judge Goffe's rationale.
2. Denials related to state and local gasoline and personal property taxes are upheld, consistent with Judge Oakes' reasoning on sales taxes.
3. A $51.90 sewing expense may be personal and non-deductible; however, since the Tax Court did not rule on this, it is remanded for determination alongside other issues.
4. Claims for interest expenses for an automobile purchase and Seattle living expenses are affirmed as denied by the Tax Court, per Judge Goffe's findings.
5. A $142.27 expense for physical conditioning during the season, not addressed by Judge Goffe, is remanded for further consideration as Hanna raised this issue.
6. Hanna's claim regarding tickets purchased for fans, distinct from those for friends, is remanded for the Tax Court's determination, despite being unaddressed by Judge Oakes.

The court agrees with the Second Circuit's opinion in Stemkowski and emphasizes the preference to avoid conflicts between circuits in consolidated Tax Court proceedings. The judgment is affirmed in part and reversed and remanded in part.