SCOTUS Reports

Tag: Away from Home

  • Bissonnette v. Comm’r, 127 T.C. 124 (2006): Deductibility of Meals and Incidental Expenses for ‘Away from Home’ Status

    Bissonnette v. Comm’r, 127 T. C. 124 (U. S. Tax Court 2006)

    In Bissonnette v. Comm’r, the U. S. Tax Court ruled that a ferryboat captain was entitled to deduct meals and incidental expenses (M&IE) incurred during layovers of 6-7 hours, as he was considered ‘away from home’ under IRS rules. The decision clarified the ‘sleep or rest rule’ for travel deductions, allowing full per diem rates for days worked, but subjecting them to a 50% limitation. This case is significant for defining the parameters of deductible travel expenses for transportation workers.

    Parties

    Marc G. Bissonnette and Lillian I. Cone, petitioners, v. Commissioner of Internal Revenue, respondent. Bissonnette was the primary party involved in the dispute over the deductibility of his travel expenses.

    Facts

    Marc G. Bissonnette was employed as the director of marine operations and senior captain for Clipper Navigation, Inc. , operating ferryboats on Puget Sound. His workdays typically lasted 15-17 hours, consisting of turnaround voyages completed within 24 hours. During peak travel seasons, Bissonnette captained voyages to Friday Harbor and Victoria, B. C. , with layovers ranging from 30 minutes to over 5 hours. In the off-peak season, he captained the ferry to Victoria with a 6-7 hour layover. Bissonnette paid for his M&IE during these layovers and sought to deduct these expenses using the Federal per diem rates. The Commissioner of Internal Revenue denied these deductions, arguing Bissonnette was not ‘away from home’ under section 162(a)(2) of the Internal Revenue Code.

    Procedural History

    The Commissioner issued a notice of deficiency for the tax years 2001, 2002, and 2003, disallowing Bissonnette’s claimed deductions for M&IE. Bissonnette and Cone timely filed a petition with the U. S. Tax Court, contesting the Commissioner’s determination. The court considered whether Bissonnette was ‘away from home’ under section 162(a)(2), and if so, whether he should prorate his M&IE deductions and apply the 50% limitation under section 274(n).

    Issue(s)

    Whether Marc G. Bissonnette was ‘away from home’ within the meaning of section 162(a)(2) of the Internal Revenue Code during his turnaround voyages completed within 24 hours?

    Whether Bissonnette, if considered ‘away from home,’ must prorate and reduce his allowable M&IE for a partial day of travel?

    Whether Bissonnette, if considered ‘away from home,’ must further reduce his allowable M&IE by 50 percent pursuant to section 274(n) of the Internal Revenue Code?

    Rule(s) of Law

    Section 162(a)(2) of the Internal Revenue Code allows taxpayers to deduct travel expenses while away from home in the pursuit of a trade or business. The ‘sleep or rest rule’ articulated in Williams v. Patterson, 286 F. 2d 333 (5th Cir. 1961), states: “If the nature of the taxpayer’s employment is such that when away from home, during released time, it is reasonable for him to need and to obtain sleep or rest in order to meet the exigencies of his employment or the business demands of his employment, his expenditures (including incidental expenses, such as tips) for the purpose of obtaining sleep or rest are deductible traveling expenses under section 162(a)(2). ” Section 274(d) requires substantiation of travel expenses, but section 1. 274-5(g) and (j) of the Income Tax Regulations allow the use of Federal per diem rates in lieu of actual expense substantiation. Section 274(n)(1) limits the deduction for food and beverage expenses to 50% of the otherwise allowable amount.

    Holding

    The court held that Bissonnette was ‘away from home’ for purposes of section 162(a)(2) during the off-peak season voyages with 6-7 hour layovers in Victoria, as he needed sleep or rest to meet the exigencies of his employment. Bissonnette was allowed to use the full Federal M&IE rate for these days, without proration. However, the court ruled that his M&IE deductions were subject to the 50% limitation under section 274(n)(1).

    Reasoning

    The court reasoned that Bissonnette’s 15-17 hour workdays, responsibility for passenger safety, and the potential for extended travel times due to various factors justified his need for sleep or rest during the 6-7 hour layovers in Victoria. The court applied the ‘sleep or rest rule,’ finding that Bissonnette’s layover was of sufficient duration to relate to a significant increase in expenses, even though he did not incur lodging costs due to sleeping on the ferryboat. The court rejected the Commissioner’s argument that the layover was solely due to scheduling, focusing instead on Bissonnette’s need for rest. Regarding the proration of M&IE, the court found that Bissonnette’s consistent use of the full Federal M&IE rate was in accordance with reasonable business practice, as allowed under section 6. 04(2) of the relevant revenue procedures. However, the court upheld the application of the 50% limitation under section 274(n)(1), as Bissonnette’s M&IE were computed using the per diem method and did not qualify for any exceptions under section 274(n)(2).

    Disposition

    The court’s decision allowed Bissonnette to deduct M&IE at the full Federal per diem rate for the days he was away from home during the off-peak season, but subject to the 50% limitation under section 274(n)(1). The case was to be resolved under Rule 155 of the Tax Court Rules of Practice and Procedure.

    Significance/Impact

    Bissonnette v. Comm’r clarifies the application of the ‘sleep or rest rule’ to transportation workers, particularly those on turnaround voyages. The decision expands the understanding of what constitutes being ‘away from home’ for tax deduction purposes, focusing on the need for sleep or rest rather than the mere duration of absence from the home terminal. It also reinforces the IRS’s position on the use of Federal per diem rates for substantiation of M&IE and the applicability of the 50% limitation under section 274(n). This case has implications for other transportation industry employees seeking to deduct travel expenses and may influence future interpretations of ‘away from home’ status in tax law.

  • Corbett v. Commissioner, 48 T.C. 1081 (1967): Defining ‘Away from Home’ for Business Expense Deductions

    Corbett v. Commissioner, 48 T. C. 1081 (1967)

    A taxpayer without a fixed abode cannot claim to be ‘away from home’ for the purposes of deducting travel expenses under section 162(a) of the Internal Revenue Code.

    Summary

    In Corbett v. Commissioner, the court addressed whether a taxpayer could deduct travel expenses under IRC section 162(a) by claiming to be ‘away from home. ‘ The taxpayer, who had no fixed residence and lived in various locations for work, argued that his brother’s home in Garfield, N. J. , was his ‘home. ‘ The court, however, found that his true home was Binghamton, N. Y. , where he lived with his family and maintained his life. The court ruled that taxpayers without a fixed abode ‘carry their homes on their backs’ and thus cannot be considered ‘away from home’ for tax purposes, denying the deduction.

    Facts

    The taxpayer, after leaving the Air Force, worked in 13 different jobs across various locations over 9 years, never establishing a fixed residence. In 1965, he lived with his family in Binghamton, N. Y. , where he was assigned work. He occasionally visited his brother’s home in Garfield, N. J. , and kept some belongings there but did not pay rent or own property in New Jersey. He registered his car and filed taxes in New York. The taxpayer sought to deduct travel expenses, claiming Garfield as his ‘home’ under IRC section 162(a).

    Procedural History

    The taxpayer petitioned the Tax Court to challenge the Commissioner’s disallowance of his travel expense deductions. The case was decided by the Tax Court, with Judge Raum writing the majority opinion, ruling in favor of the Commissioner.

    Issue(s)

    1. Whether a taxpayer without a fixed abode can claim to be ‘away from home’ under IRC section 162(a) for the purpose of deducting travel expenses.

    Holding

    1. No, because a taxpayer without a fixed abode ‘carries their home on their back’ and thus cannot be considered ‘away from home’ for tax purposes, as per established case law.

    Court’s Reasoning

    The court applied the legal principle that a taxpayer must have a fixed and permanent abode to claim a ‘home’ under IRC section 162(a). The court referenced cases like James v. United States, stating that a taxpayer without a fixed abode cannot be ‘away from home. ‘ The court found that the taxpayer’s connections to Garfield, N. J. , were too tenuous to establish it as his home. Instead, Binghamton, N. Y. , where he lived with his family, registered his car, and filed taxes, was considered his home. The court emphasized that the purpose of the ‘away from home’ deduction is to mitigate the burden of maintaining two residences, which did not apply to the taxpayer. The court also noted that even if Garfield were considered a residence, the taxpayer’s stay in Binghamton had become indefinite, disqualifying him from the deduction.

    Practical Implications

    This decision clarifies that taxpayers with a nomadic lifestyle, moving frequently for work without establishing a fixed residence, cannot claim travel expense deductions under IRC section 162(a). Legal practitioners should advise clients with similar circumstances that they cannot deduct travel expenses as being ‘away from home. ‘ This ruling impacts how tax professionals analyze cases involving itinerant workers and underscores the need for a fixed and permanent abode to claim such deductions. Subsequent cases have followed this principle, reinforcing the necessity of a stable home base for tax deduction purposes.

  • Courtney v. Commissioner, 32 T.C. 334 (1959): Defining “Home” for Deductible Travel Expenses

    32 T.C. 334 (1959)

    For purposes of deducting travel expenses, a taxpayer’s “home” is their principal place of business, not their residence, and expenses are only deductible if incurred while away from that place of business.

    Summary

    Darrell and Hazel Courtney sought to deduct living expenses and other costs incurred while working at Edwards Air Force Base, arguing they were “away from home” because their family residence was in Long Beach. The Tax Court held the allowance received from the employer, in addition to the salary, was income. The court determined that Edwards Air Force Base was the petitioner’s principal place of employment, making expenses there personal, non-deductible expenses, not travel expenses incurred while away from home. The court clarified that the ‘home’ for the purposes of deducting traveling expenses is not necessarily a taxpayer’s residence but is their principal place of employment.

    Facts

    Darrell Courtney worked for North American Aviation. In 1952, he was transferred from the company’s main plant in Downey, California, to Edwards Air Force Base, 35 miles away, to work on a project under contract with the U.S. Air Force. The project was considered temporary. North American paid Courtney an allowance to cover the increased living expenses at Edwards Air Force Base, in addition to his salary. The Courtneys moved to a residence in Lancaster, California, near Edwards Air Force Base, where they lived from late 1952 until 1954. They sought to deduct the allowance, as well as expenses for rent, utilities, moving, and car expenses, as “traveling expenses while away from home.”

    Procedural History

    The Commissioner of Internal Revenue determined a deficiency in the Courtneys’ income tax for 1953, disallowing the deductions for “living expenses away from home.” The Courtneys petitioned the United States Tax Court, arguing that their expenses were deductible. The Tax Court ruled in favor of the Commissioner, finding that the expenses were not deductible traveling expenses.

    Issue(s)

    1. Whether the living expense allowance from North American Aviation was gross income?

    2. Whether Edwards Air Force Base was Courtney’s “home” for tax purposes?

    3. Whether various expenses, including rent, utilities, moving costs, and car expenses, incurred by the petitioner at Edwards Air Force Base, were deductible as traveling expenses?

    4. Whether the cost of meals taken at the Edwards Base when petitioner worked overtime was deductible?

    Holding

    1. Yes, because it was additional compensation for services.

    2. Yes, because Edwards Air Force Base was petitioner’s principal place of employment.

    3. No, because the expenses were not incurred “while away from home” in pursuit of business.

    4. No, because these meal expenses were personal expenses.

    Court’s Reasoning

    The court determined that the additional cash allowance paid by North American Aviation to Courtney constituted income under Section 22(a) of the Internal Revenue Code. The Court also determined that Courtney’s “home” for the purpose of determining travel expenses, was Edwards Air Force Base, not Downey or Long Beach. The court cited Commissioner v. Flowers, which established that the expenses must be business expenses incurred while away from the taxpayer’s principal place of business to be deductible. The court found that the expenses were not incurred in the pursuit of the employer’s business but were instead personal expenses, and therefore, not deductible. The court noted that the costs of commuting, meals during work, moving, and depreciation of personal property are generally non-deductible personal expenses. The Court distinguished the allowance from reimbursed business expenses. The court emphasized that, since deductions are a matter of legislative grace, compliance with the conditions in the statute is necessary for an allowable deduction.

    Practical Implications

    The case is important for clarifying how “home” is defined for the purposes of deducting travel expenses under U.S. tax law. For attorneys and tax professionals, this case provides clear guidance that a taxpayer’s home is typically their principal place of business, not their residence. To deduct travel expenses, a taxpayer must be away from their “home” in the pursuit of business. The decision underscores the importance of establishing a business headquarters and documenting that travel is required by the exigencies of that business. This impacts how businesses define employee work locations and how employees can deduct certain expenses. Subsequent cases continue to cite Courtney and Flowers in defining the criteria for deductible travel expenses, particularly where employees have multiple work locations or work assignments that could be considered temporary. This case also highlights that allowances meant to cover additional living expenses constitute income, not reimbursements.

  • Anderson v. Commissioner, 18 T.C. 649 (1952): Deductibility of Meal Expenses While Traveling for Work

    18 T.C. 649 (1952)

    An employee who travels away from their home terminal for work and incurs meal expenses during required rest periods is entitled to deduct those expenses as business-related travel expenses under Section 23(a)(1)(A) of the Internal Revenue Code.

    Summary

    David Anderson, a Railway Express Agency employee, sought to deduct meal expenses incurred during overnight trips between his home terminal in Parsons, Kansas, and Oklahoma City, Oklahoma. The Tax Court addressed whether these expenses were deductible as business-related travel expenses. The court held that because Anderson’s work required him to travel away from his home terminal and he incurred meal expenses during mandatory rest periods before returning, these expenses were deductible under Section 23(a)(1)(A) of the Internal Revenue Code. The court distinguished Anderson’s situation from a mere “turn-around” run, emphasizing the necessity of rest periods during his long trips.

    Facts

    David Anderson worked for Railway Express Agency, performing duties on trains between Parsons, Kansas, and Oklahoma City, Oklahoma. Parsons was his home terminal. His schedule involved making two consecutive round trips between the cities, requiring him to be away from Parsons overnight for 178 nights during the year. During layovers in Oklahoma City, Anderson had rest periods of 2.5 to 3 hours. He purchased meals in Oklahoma City during these rest periods, totaling 267 meals in 1948, at an average cost of $0.75 per meal. He was not reimbursed for these expenses.

    Procedural History

    The Commissioner of Internal Revenue determined a deficiency in Anderson’s income tax for 1948. Anderson conceded part of the deficiency but contested the disallowance of meal expense deductions. The Tax Court reviewed the Commissioner’s decision, focusing solely on the deductibility of the meal expenses.

    Issue(s)

    Whether the meal expenses incurred by the petitioner while traveling away from his home terminal for work constitute deductible business expenses under Section 23(a)(1)(A) of the Internal Revenue Code.

    Holding

    Yes, because the petitioner’s work required him to travel away from his home terminal, and the meal expenses were incurred during necessary rest periods before commencing the return trip, the expenses are deductible under Section 23(a)(1)(A) of the Internal Revenue Code.

    Court’s Reasoning

    The Tax Court reasoned that Section 23(a)(1)(A) allows for the deduction of traveling expenses, including meals and lodging, while away from home in pursuit of a trade or business. The court emphasized that Anderson’s work schedule involved overnight trips and mandatory rest periods in Oklahoma City. The court distinguished this case from situations where expenses were considered personal, such as in Louis Drill, 8 T.C. 902. The court also distinguished Anderson’s situation from a “turn-around” run as in Fred Marion Osteen, 14 T.C. 1261, where the employee was not required to have an extended rest period away from home. The court referenced I.T. 3395, which stated that railroad trainmen who are required to remain at away-from-home terminals to obtain necessary rest prior to making a further run or beginning a return run to the home terminal are entitled to deduct the cost of room rental and meals while away from home on such runs. The court found that Anderson’s situation fit this ruling because the rest periods were necessary for him to safely and effectively perform his job. The court stated, “We think it is too narrow a view of the facts not to regard both round trips as overnight trips. Furthermore, it was necessary for the petitioner to obtain rest at the end of the outbound run before starting upon the return run.”

    Practical Implications

    This case clarifies the circumstances under which meal expenses incurred during work-related travel are deductible. It emphasizes the importance of mandatory rest periods and overnight stays in determining whether expenses are business-related rather than personal. The ruling suggests that the length of the rest period should not be the determining factor, but rather the necessity of that rest for the employee to continue performing their duties. The decision has implications for industries involving frequent travel, such as transportation and logistics, where employees routinely incur meal expenses away from their home base. Later cases may distinguish themselves based on the nature of the travel, the length of the layover, and the requirement for rest before continuing work.

  • Disney v. Commissioner, T.C. Memo. 1947: Commuting Railway Clerk’s Meal Expenses Not Deductible as ‘Away From Home’

    Disney v. Commissioner, T.C. Memo. 1947

    Expenses for meals consumed during daily commutes, even when work requires travel away from one’s residence, are generally considered non-deductible personal expenses and not incurred while ‘away from home’ for tax purposes.

    Summary

    The Tax Court held that a railway postal clerk could not deduct the cost of meals eaten in Charlotte, North Carolina, during his daily round-trip route from Greenville, South Carolina. The court reasoned that these meal expenses were personal and not incurred while ‘away from home’ in the context of deductible travel expenses. The petitioner’s situation was likened to that of any worker eating a meal away from their residence during a regular workday, regardless of location. The court distinguished between travel inherent to employment and personal expenses for sustenance.

    Facts

    The petitioner, a railway postal clerk, lived in Greenville, South Carolina, and worked a regular route to Charlotte, North Carolina, and back daily. His schedule involved leaving Greenville at 8:00 PM, arriving in Charlotte at 10:40 PM, having a meal, departing Charlotte at 11:48 PM, and returning to Greenville at 2:15 AM. He incurred expenses of $304 for 304 meals in Charlotte during 1945, averaging $1 per meal, which were not reimbursed by his employer. He was on duty from 7:55 PM to 2:15 AM, with a 30-minute meal break in Charlotte. The round trip was approximately 200 miles.

    Procedural History

    This case originated in the Tax Court of the United States. The Commissioner of Internal Revenue determined a deficiency in the petitioner’s income tax for 1945, disallowing the deduction for meal expenses. The petitioner contested this determination in Tax Court.

    Issue(s)

    1. Whether the cost of meals consumed by a railway postal clerk in Charlotte, North Carolina, during his daily round-trip route from Greenville, South Carolina, constitutes a deductible expense ‘away from home’ under Section 23(a)(1)(A) of the Internal Revenue Code.

    Holding

    1. No, because the meal expenses are considered personal and not incurred while ‘away from home’ in the context of deductible travel expenses. The Tax Court sustained the Commissioner’s disallowance of the deduction.

    Court’s Reasoning

    The court reasoned that the meal expense was a personal expense, not materially different from a worker eating a meal at a restaurant in their home city. The court distinguished the petitioner’s situation from employment inherently requiring travel away from home, such as truckers or bus drivers on longer routes. The opinion stated, “The petitioner was in no essentially different position from the worker who is unable to have one of his meals at home.” It emphasized that the expense was for personal sustenance, stating, “The expenses for which the petitioner herein is claiming a deduction are confined to the act of traveling. No part of them is expense inherent in supplying the personal needs of the petitioner, regardless of his location.” The court cited Commissioner v. Flowers, 326 U.S. 465 (1946), for the principle that personal expenses are generally not deductible. It distinguished Kenneth Waters, 12 T.C. 414 (1949), noting that Waters involved deductible automobile travel expenses, not meal expenses, and concerned extra services beyond regular employment.

    Practical Implications

    This case reinforces the principle that daily commuting expenses, including meals, are generally considered non-deductible personal expenses, even when the commute involves travel to a different city. It clarifies that to be ‘away from home’ for tax purposes in the context of meal deductions typically requires travel that is more than just a daily commute and often involves overnight stays. Legal practitioners should advise clients that meal expenses are deductible as travel expenses only when they are incurred on trips that take them away from their tax home overnight and are directly related to business. This case serves as a reminder that the ‘away from home’ rule is narrowly construed and does not extend to the ordinary costs of commuting and daily sustenance, even if work requires being away from one’s residence during meal times.

  • Chandler v. Commissioner, 6 T.C. 926 (1946): Deductibility of Same-Day Travel Expenses

    6 T.C. 926 (1946)

    An employee can deduct travel expenses, including automobile expenses, incurred while traveling away from home for work, even if the travel does not involve an overnight stay.

    Summary

    The petitioner, a store manager, sought to deduct automobile expenses incurred for Sunday trips from his home in Independence to Parsons, Kansas, for work purposes. The IRS argued that the expenses were not deductible because the trips were not overnight. The Tax Court held that the expenses were deductible under Section 22(n)(2) of the Internal Revenue Code, finding that “travel…while away from home” includes same-day travel and does not necessarily require an overnight stay. The court emphasized that the travel was required by his employer and was beyond the scope of his regular employment.

    Facts

    The petitioner was employed as a store manager in Independence, Kansas. Due to a wartime emergency, he was required to travel to Parsons, Kansas, on Sundays to perform additional work for his employer. The petitioner traveled by automobile from his home in Independence to Parsons and back on the same day. He sought to deduct automobile expenses incurred during these trips from his adjusted gross income for income tax purposes.

    Procedural History

    The Commissioner of Internal Revenue disallowed the deduction for travel expenses. The taxpayer petitioned the Tax Court for a redetermination of the deficiency. The Tax Court reviewed the Commissioner’s determination.

    Issue(s)

    1. Whether expenses incurred for travel, meals, and lodging while away from home requires an overnight stay to be deductible under Section 22(n)(2) of the Internal Revenue Code?

    Holding

    1. No, because the phrase “travel * * * while away from home” in its plain and ordinary sense means precisely what it says, and does not require an overnight stay.

    Court’s Reasoning

    The court reasoned that the phrase “travel * * * while away from home” should be interpreted in its plain, ordinary, and popular sense. The court found no indication that Congress intended the phrase to require an overnight stay. The court reasoned that it would be absurd to disallow a deduction for an employee who flies from Boston to Washington on business and returns the same day, while allowing a deduction for the same trip taken over two days. The court distinguished the petitioner’s situation from those of employees whose regular work inherently involves same-day travel. The court noted that the petitioner’s travel to Parsons was extra service attached to his normal employment, and related to the war emergency. The expenses were for travel itself, not for personal needs such as food.

    Practical Implications

    This case clarifies that taxpayers can deduct travel expenses incurred while away from home for work purposes, even if the travel does not involve an overnight stay. The key factor is whether the travel is required by the employer and is related to the employee’s work. This ruling provides a more flexible interpretation of “travel…while away from home,” benefiting employees who undertake same-day business trips. It emphasizes that tax statutes should be interpreted in their plain, ordinary sense, unless Congress clearly intended a different meaning. Later cases would likely consider if the travel was ordinary and necessary to the taxpayer’s business and whether it duplicated personal expenses. This case informs how businesses consider employee travel reimbursements and how employees structure their deductions.