<strong><em>Heuer v. Commissioner</em>, 34 T.C. 958 (1960)</em></strong>

The cost of commuting from one’s residence to a work location is a nondeductible personal expense, while expenses incurred in travel between work locations are deductible business expenses.

<strong>Summary</strong>

The case concerns a river pilot who sought to deduct automobile expenses related to his work. The Tax Court addressed whether these expenses were deductible as ordinary and necessary business expenses under the Internal Revenue Code. The court distinguished between commuting expenses (travel from home to a work location) and business travel expenses (travel between work locations). The court held that the expenses of traveling from the pilot’s home to the initial assignment location were non-deductible commuting expenses, while expenses incurred in traveling from one assignment to another were deductible. The court applied a reasonable approximation to determine the deductible portion of the expenses. The taxpayer, a river pilot, used his car to travel to various docks and wharves for his assignments. The Court determined a portion of the expenses were deductible, representing travel between work locations and the car’s depreciation.

<strong>Facts</strong>

William L. Heuer, a river pilot, worked in the New Orleans port area and received pilotage assignments through the Crescent River Port Pilots’ Association. He used his automobile to travel to different docks and wharves for his assignments. He was not provided with company transportation to many of the docks. His assignments varied, and he could be called to work at any time. Heuer claimed deductions for car expenses and depreciation, arguing they were business expenses. The IRS disallowed these deductions, arguing that they were commuting expenses.

<strong>Procedural History</strong>

The Commissioner of Internal Revenue determined deficiencies in Heuer’s income tax returns for 1953 and 1954, disallowing deductions for automobile expenses and depreciation claimed by Heuer. The case was brought before the United States Tax Court.

<strong>Issue(s)</strong>

1. Whether the cost of operating and maintaining an automobile, including depreciation, used by a river pilot to travel from his residence to various points of assignment and return is deductible as an ordinary and necessary business expense?

2. Whether the cost of operating and maintaining an automobile, including depreciation, used by the river pilot to travel from one assignment to another is deductible as an ordinary and necessary business expense?

<strong>Holding</strong>

1. No, because these expenses represent non-deductible commuting costs.

2. Yes, because these expenses constitute deductible business expenses.

<strong>Court's Reasoning</strong>

The court reiterated the established principle that expenses incurred in traveling between one’s residence and place of work are considered non-deductible personal commuting expenses. The court noted that this rule applies regardless of the distance traveled, the availability of public transportation, or other factors that might make using a personal vehicle more practical. The court emphasized that the pilot’s home was not a business headquarters, and the initial trip to a work location was the same as commuting. The court held that the costs associated with travel between the pilot’s residence and his various assignments were personal commuting expenses. The court determined that expenses related to travel between assignments were business-related. The court conceded that accurately determining the deductible amount was challenging due to insufficient evidence. The court used an approximation, concluding that 25% of the claimed car expenses and depreciation were deductible.

“The courts have always recognized a distinction between expenses of traveling incurred in carrying on a trade or business and commuting expenses, that is, those incurred in going from one’s residence to one’s place of work and return. The latter have always been held to be nondeductible personal expenses, as distinguished from business expenses.”

<strong>Practical Implications</strong>

This case is important for attorneys and tax professionals because it reinforces the distinction between deductible business travel expenses and non-deductible commuting expenses. The ruling requires careful examination of the nature of the travel and the location of the taxpayer’s business. When advising clients, practitioners need to differentiate the facts carefully to advise on the deductibility of travel costs. This decision emphasizes that the initial trip to an assignment constitutes commuting. It indicates that expenses for traveling between different work assignments are deductible. If the facts of the case do not clearly distinguish between commuting and work, then the court may use its best judgment to determine an appropriate deduction, as it did in this case. The court’s decision highlights the importance of maintaining detailed records of business travel to substantiate deductions. The court also notes that an employee or independent contractor’s place of employment is determined by the location of work.