SCOTUS Reports

Tag: Tax Home

  • Johnson v. Commissioner, 115 T.C. 210 (2000): Deducting Incidental Travel Expenses Using Per Diem Rates

    Johnson v. Commissioner, 115 T. C. 210 (2000)

    An employee may use the incidental expense portion of per diem rates to deduct incidental travel expenses incurred while working away from home, even if meals and lodging are provided by the employer.

    Summary

    Marin Johnson, a merchant seaman, claimed deductions for incidental travel expenses incurred while working on a vessel. He used the full per diem rates for meals and incidental expenses (M&IE) to calculate these deductions, despite his employer providing meals and lodging. The Tax Court ruled that Johnson’s tax home was his residence, and he could deduct his incidental expenses using the incidental portion of the M&IE rates. The decision clarified that the full M&IE rates could not be used when only incidental expenses were incurred, but actual expenses could be deducted if substantiated.

    Facts

    Marin Johnson, a merchant seaman, captained the M/V American Falcon, which transported military equipment worldwide. He worked away from his residence in Freeland, Washington, for 173 days in 1994 and 205 days in 1996. Crowley American Transport, Inc. , his employer, provided him with lodging and meals while he worked on the vessel. Johnson paid for incidental expenses such as hygiene products, laundry, and transportation from the vessel to service providers. He claimed deductions of $3,784 for 1994 and $3,654 for 1996 using the full M&IE rates for each location he traveled to, without receipts to substantiate the actual costs.

    Procedural History

    The Commissioner of Internal Revenue determined deficiencies in Johnson’s taxes for 1994 and 1996, disallowing the claimed deductions for incidental travel expenses. Johnson petitioned the United States Tax Court to challenge the deficiencies. The Tax Court held that Johnson’s tax home was his residence in Freeland, Washington, and he was entitled to deduct his incidental travel expenses using the incidental portion of the M&IE rates, but not the full M&IE rates.

    Issue(s)

    1. Whether Johnson’s tax home was the situs of his residence in Freeland, Washington?
    2. Whether Johnson’s testimony alone was sufficient to support a finding that he paid incidental travel expenses while employed away from his tax home?
    3. Whether Johnson’s use of the full M&IE rates to calculate his incidental travel expenses was proper?

    Holding

    1. Yes, because Johnson maintained a permanent residence in Freeland, Washington, where he lived with his family, and he incurred substantial living expenses there.
    2. Yes, because Johnson’s credible testimony was sufficient to establish that he incurred incidental expenses while working away from his tax home.
    3. No, because the revenue procedures allow the use of the M&IE rates only for the incidental expense portion when meals are provided by the employer.

    Court’s Reasoning

    The Tax Court determined that Johnson’s tax home was his residence in Freeland, Washington, as he maintained a permanent residence there and incurred substantial living expenses. The court rejected the Commissioner’s argument that Johnson was an itinerant without a tax home, noting that Johnson’s work schedule was fixed and he returned to his residence during vacations. The court found Johnson’s testimony credible in establishing that he incurred incidental expenses while working away from home. However, the court held that Johnson could not use the full M&IE rates to calculate his deductions, as the revenue procedures and federal travel regulations specify that only the incidental expense portion of the M&IE rates should be used when meals and lodging are provided by the employer. The court emphasized that taxpayers could deduct actual incidental expenses if properly substantiated.

    Practical Implications

    This decision clarifies that employees who receive meals and lodging from their employers while working away from home can still deduct incidental expenses using the incidental portion of the M&IE rates. Taxpayers must ensure they use the correct portion of the M&IE rates and substantiate actual expenses if they exceed the incidental rates. Legal practitioners should advise clients to keep detailed records of incidental expenses and understand the limitations on using M&IE rates. The ruling may impact how businesses structure compensation packages for employees who travel frequently, as it affects the deductibility of incidental expenses. Subsequent cases have referenced this decision when addressing tax home and travel expense deductions.

  • Harrington v. Commissioner, 93 T.C. 297 (1989): Tax Home and Foreign Earned Income Exclusion for Rotational Workers

    Harrington v. Commissioner, 93 T. C. 297 (1989)

    A U. S. citizen working abroad on a rotational schedule does not qualify for the foreign earned income exclusion if their abode remains in the U. S.

    Summary

    James Harrington, a U. S. citizen working in Angola on a 28-day work/28-day rest rotation, sought to exclude his foreign income under IRC § 911. The Tax Court held that Harrington’s strong ties to his Texas home meant his abode remained in the U. S. , disqualifying him from the exclusion. Additionally, Harrington failed to show he could have met the tax home, bona fide residence, or physical presence requirements but for Angola’s adverse conditions, as required for a waiver under § 911(d)(4). This case clarifies that rotational workers must establish a foreign tax home to claim the exclusion.

    Facts

    James Harrington worked for SECO Industries in Angola from January 1983, on a 28-day work/28-day rest schedule. During work periods, he lived on a platform and a moored ship off Angola’s coast. He returned to his family in Frankston, Texas, during rest periods. Harrington’s family remained in Texas, where they maintained a home, bank accounts, and vehicles. Angola’s government prohibited Harrington’s family from joining him and restricted his movements within the country. He was physically present in Angola for 199 days in 1983 and 179 days in 1984.

    Procedural History

    The Commissioner determined deficiencies in Harrington’s 1983 and 1984 federal income taxes, disallowing his claimed foreign earned income exclusion. Harrington petitioned the Tax Court for a redetermination. The court found Harrington did not qualify for the exclusion and upheld the deficiencies.

    Issue(s)

    1. Whether Harrington’s abode was in the United States during the years at issue, preventing him from having a tax home in Angola for purposes of IRC § 911.
    2. Whether Harrington could reasonably have been expected to meet the tax home, bona fide residence, or physical presence requirements of IRC § 911(d)(1) but for war, civil unrest, or similar adverse conditions in Angola, entitling him to a waiver under IRC § 911(d)(4).

    Holding

    1. Yes, because Harrington maintained strong domestic ties to Texas, including family, bank accounts, and vehicles, while his ties to Angola were limited and transitory.
    2. No, because Harrington failed to show that, but for Angola’s conditions, he would have established a tax home there, become a bona fide resident, or remained physically present for the required 330 days.

    Court’s Reasoning

    The court applied the domestic ties analysis from Lemay v. Commissioner, focusing on Harrington’s strong ties to Texas and limited, transitory connections to Angola. The court rejected Harrington’s argument that his abode shifted to Angola during work periods, finding no support for a different interpretation of “abode” under the physical presence test. Regarding the waiver under § 911(d)(4), the court found Harrington did not show a direct causal link between Angola’s conditions and his failure to meet § 911(d)(1) requirements. His rotational schedule was common in the industry and not unique to Angola. Additionally, Harrington could not have reasonably expected to meet the requirements, as he knew his schedule and Angola’s conditions from the start. The court noted that Harrington was never forced to permanently leave Angola as contemplated by the waiver provision.

    Practical Implications

    This decision impacts how attorneys should analyze similar cases involving rotational workers seeking the foreign earned income exclusion. It clarifies that a strong U. S. abode precludes establishing a foreign tax home, even for those working abroad for significant periods. Practitioners must carefully assess clients’ domestic ties when considering the exclusion. The case also limits the applicability of the § 911(d)(4) waiver, requiring a direct causal link between a country’s adverse conditions and a taxpayer’s inability to meet the exclusion requirements. This ruling may affect how businesses structure expatriate assignments and how tax professionals advise clients on rotational work arrangements. Subsequent cases like Barbieri v. Commissioner have followed this reasoning, reinforcing its importance in international tax practice.

  • Horton v. Commissioner, 85 T.C. 52 (1985): Determining Tax Home for Temporary Employment

    Horton v. Commissioner, 85 T. C. 52 (1985)

    A taxpayer’s tax home remains at their permanent residence if employment away from home is temporary.

    Summary

    In Horton v. Commissioner, the Tax Court ruled on the tax home of a professional hockey player, William Horton, who played for minor league teams in California during the 1978 tax year. The court determined that Horton’s employment in California was temporary, thus his tax home remained in Flint, Michigan, where he and his wife maintained a permanent residence. This allowed Horton to deduct travel and living expenses incurred while playing hockey away from his tax home. The court’s rationale hinged on the temporary nature of Horton’s employment contracts and the fact that his wife’s permanent job was in Michigan, supporting the conclusion that their tax home did not shift to California.

    Facts

    William Horton, a professional hockey player, played for minor league teams in California during the 1978 tax year. His employment contracts were limited to six months, covering the hockey season. Horton maintained a residence in Flint, Michigan, where his wife, Sharon, worked full-time at a telephone company, earning more than half of the family’s income. Horton returned to Michigan between seasons and worked as a real estate agent during the off-season. The IRS challenged Horton’s deductions for travel and living expenses, arguing his tax home was in California.

    Procedural History

    Horton filed a petition with the Tax Court challenging the IRS’s determination of a tax deficiency and additions to tax for the 1978 tax year. The court dismissed the case against Sharon Horton due to her death and focused on the tax home issue regarding William Horton.

    Issue(s)

    1. Whether Horton’s employment in California during 1978 was temporary or indefinite, affecting the location of his tax home.
    2. Whether Horton was entitled to deductions for travel and living expenses incurred while playing hockey in California.

    Holding

    1. Yes, because Horton’s employment contracts were limited to six months and his actions demonstrated a treatment of the employment as temporary, his tax home remained in Flint, Michigan.
    2. Yes, because Horton’s employment was temporary, he was entitled to deduct travel and living expenses while away from his tax home in Michigan.

    Court’s Reasoning

    The court applied the rule that a taxpayer’s tax home is generally the vicinity of their principal place of business unless their employment away from home is temporary. The court determined that Horton’s employment in California was temporary, as his contracts were for six months, and he returned to Michigan between seasons. The court emphasized that Horton’s wife’s permanent job in Michigan, where she earned the majority of the family’s income, further supported the conclusion that their tax home remained in Michigan. The court cited cases like Groover v. Commissioner to support its application of the temporary employment exception to the tax home rule. The court also noted Horton’s consistent treatment of his California employment as temporary, as evidenced by his return to Michigan and engagement in real estate work during the off-season.

    Practical Implications

    This decision clarifies that a taxpayer’s tax home remains at their permanent residence if their employment away from home is temporary. For attorneys and tax professionals, this case provides guidance on how to assess a client’s tax home, particularly for individuals with temporary employment in different locations. It highlights the importance of considering the taxpayer’s family situation, such as a spouse’s employment, when determining the tax home. The ruling also has implications for professional athletes and others with seasonal or temporary work, allowing them to deduct travel and living expenses incurred away from their permanent residence. Subsequent cases have followed this precedent when addressing similar tax home issues, reinforcing its significance in tax law practice.

  • Barone v. Commissioner, 85 T.C. 462 (1985): Defining ‘Tax Home’ for Traveling Employees

    Barone v. Commissioner, 85 T. C. 462 (1985)

    A taxpayer must have a ‘tax home’ to deduct travel expenses under IRC section 162(a)(2), which is determined by objective financial criteria rather than subjective intent.

    Summary

    Edward Barone, a truck driver, sought to deduct travel and other expenses from his 1981 taxes. The Tax Court ruled that Barone had no ‘tax home’ as he did not maintain a principal place of business or incur substantial continuing living expenses at any permanent residence, disallowing his travel expense deductions. However, the court allowed deductions for sheets and a mattress used in his truck and for a fine paid by his employer, while disallowing deductions for personal fines and tennis shoes.

    Facts

    Edward Barone, an owner-operator of a tractor-trailer, exclusively drove for Interstate Contract Carrier Corp. (ICCC) with a home terminal in Phoenix, Arizona. He spent 227 days on the road and 138 days at his parents’ home in Mesa, Arizona, paying them $1 per day when on the road and $2 per day when at home. Barone claimed deductions for travel expenses, fines, a mattress and sheets for his truck, and tennis shoes worn while driving.

    Procedural History

    Barone filed his 1981 federal income tax return and the Commissioner of Internal Revenue determined a deficiency. Barone petitioned the U. S. Tax Court, which heard the case and issued its opinion on September 17, 1985.

    Issue(s)

    1. Whether Barone maintained a ‘tax home’ during 1981, entitling him to deduct travel expenses under IRC section 162?
    2. Whether Barone may deduct fines he paid for violations charged while operating his truck?
    3. Whether Barone may deduct an amount withheld from his paycheck to pay a fine resulting from a violation charged to ICCC?
    4. Whether Barone is entitled to deduct the cost of a mattress and sheets he bought for his truck?
    5. Whether Barone may deduct the cost of tennis shoes he wore while driving his truck?

    Holding

    1. No, because Barone did not have a principal place of business or incur substantial continuing living expenses at a permanent residence.
    2. No, because personal fines are nondeductible under IRC section 162(f).
    3. Yes, because the withheld amount was not a fine or penalty paid by Barone to the government, but an involuntary payment to ICCC.
    4. Yes, because the mattress and sheets were ordinary and necessary business expenses under IRC section 162.
    5. No, because the tennis shoes were not specifically required for his employment and were adaptable to general use.

    Court’s Reasoning

    The court determined that Barone did not have a ‘tax home’ because his principal place of business was not in Phoenix despite the home terminal being there, and the payments to his parents were not substantial enough to qualify as a permanent residence. The court applied IRC section 162(a)(2) and relevant case law to conclude that Barone could not deduct travel expenses. Personal fines were nondeductible under IRC section 162(f), but the amount withheld from Barone’s pay for ICCC’s fine was deductible as it did not fall under section 162(f). The court allowed deductions for the mattress and sheets as ordinary and necessary business expenses, but denied the deduction for tennis shoes as they were not required for his job and were adaptable to general use.

    Practical Implications

    This decision clarifies that for traveling employees, a ‘tax home’ must be established by objective financial criteria, not merely by subjective intent. Practitioners should advise clients in similar situations to maintain substantial living expenses at a permanent residence to claim travel deductions. The case also reinforces that personal fines are not deductible, but fines paid by an employer and involuntarily withheld from an employee’s pay might be. This ruling is significant for truck drivers and other itinerant workers in determining their tax home and allowable deductions.

  • Mitchell v. Commissioner, 73 T.C. 225 (1979): Defining ‘Tax Home’ for Travel Expense Deductions

    Mitchell v. Commissioner, 73 T. C. 225 (1979)

    A taxpayer’s ‘tax home’ for travel expense deductions is the vicinity of their principal place of employment, unless the employment is temporary.

    Summary

    In Mitchell v. Commissioner, the Tax Court ruled that Ted Mitchell’s tax home was near Napa State Hospital, his principal place of employment, rather than his family residence in Ukiah. Mitchell, who worked at Napa after transferring from Mendocino State Hospital, sought to deduct his travel expenses between Ukiah and Napa. The court held that his employment at Napa was indefinite, not temporary, thus his tax home was Napa, and his travel expenses were non-deductible personal expenses. This case clarifies the ‘tax home’ concept for travel deductions under section 162(a)(2), emphasizing the importance of employment duration in determining tax home location.

    Facts

    Ted Mitchell worked as a psychiatric technician at Mendocino State Hospital in Ukiah until 1972, when he transferred to Napa State Hospital due to the closure of Mendocino. He continued working at Napa until his retirement in 1977. During his employment at Napa, Mitchell maintained his family home in Ukiah, where his wife Jan resided. Mitchell lived in a rented trailer in Napa during the workweek and returned to Ukiah on weekends. He claimed deductions for travel expenses between Napa and Ukiah for 1975 and 1976, asserting that Ukiah was his tax home.

    Procedural History

    The IRS determined deficiencies in Mitchell’s federal income tax for 1975 and 1976, disallowing his claimed travel expense deductions. Mitchell petitioned the Tax Court, which consolidated the cases for trial and opinion. The court ultimately ruled in favor of the Commissioner, holding that Mitchell’s tax home was at Napa, not Ukiah.

    Issue(s)

    1. Whether Ted Mitchell’s tax home for the purpose of deducting travel expenses under section 162(a)(2) was in Ukiah or near Napa State Hospital.

    Holding

    1. No, because Mitchell’s employment at Napa State Hospital was indefinite, not temporary, making the vicinity of Napa his tax home for tax purposes.

    Court’s Reasoning

    The Tax Court applied the general rule that a taxpayer’s ‘tax home’ is the vicinity of their principal place of employment, as established in cases like Daly v. Commissioner and Foote v. Commissioner. The court rejected Mitchell’s argument that his tax home was Ukiah, his family residence, citing the ‘temporary’ employment exception from Peurifoy v. Commissioner. The court found that Mitchell’s employment at Napa was indefinite because its termination could not have been foreseen within a short period. The court also considered the Ninth Circuit’s approach in cases like Coombs v. Commissioner and Harvey v. Commissioner, concluding that Mitchell’s employment at Napa was for a long period, thus shifting his tax home to Napa. The court emphasized that Mitchell’s decision to maintain a home in Ukiah was a personal choice, and his travel expenses between Napa and Ukiah were non-deductible personal expenses.

    Practical Implications

    This decision has significant implications for taxpayers claiming travel expense deductions under section 162(a)(2). It clarifies that the tax home is generally the principal place of employment unless the employment is temporary. Taxpayers must carefully consider the duration of their employment at a new location when determining their tax home. The ruling impacts how tax professionals advise clients on travel deductions, particularly for those who maintain a family residence away from their primary work location. Subsequent cases, such as Coombs v. Commissioner, have applied this principle, reinforcing the need for taxpayers to assess the permanency of their employment when claiming travel expenses. This case also underscores the importance of maintaining clear records and understanding the IRS’s criteria for temporary versus indefinite employment.

  • Daly v. Commissioner, 72 T.C. 190 (1979): Determining Tax Home for Traveling Salesmen

    Daly v. Commissioner, 72 T. C. 190 (1979)

    A traveling salesman’s tax home is the principal place of business, not the personal residence, if the residence is maintained for personal reasons.

    Summary

    Lee Daly, a salesman for Myrtle Desk Co. , resided in McLean, Virginia, but his sales territory was in eastern Pennsylvania, Delaware, and New Jersey, centered around Philadelphia. He claimed deductions for travel between McLean and his sales territory. The Tax Court held that Philadelphia was his tax home, not McLean, because his residence was maintained for personal reasons. Consequently, travel expenses between McLean and Philadelphia were not deductible as business expenses. The decision underscores that a taxpayer’s tax home is the principal place of business, not the personal residence, if the latter is chosen for personal convenience.

    Facts

    Lee E. Daly was employed as a district sales manager for Myrtle Desk Co. , assigned to a three-state sales territory consisting of eastern Pennsylvania, Delaware, and New Jersey. He resided in McLean, Virginia, and conducted administrative work from his home office there. In 1975, Daly made numerous sales trips, with the majority centered around Philadelphia. He sought to deduct travel expenses between McLean and his sales territory, as well as food and lodging costs incurred during these trips. The Commissioner of Internal Revenue disallowed these deductions, asserting that Philadelphia was Daly’s tax home.

    Procedural History

    The Commissioner determined a deficiency in Daly’s federal income tax for 1975 and disallowed $7,025. 95 of claimed deductions for travel, meals, and lodging expenses. After concessions by the Commissioner, $1,952. 95 remained in dispute. The case was brought before the United States Tax Court, which upheld the Commissioner’s determination that Philadelphia was Daly’s tax home.

    Issue(s)

    1. Whether Philadelphia, rather than McLean, Virginia, was Daly’s tax home for the purpose of deducting travel expenses under section 162(a)(2), I. R. C. 1954?
    2. Whether Daly’s travel expenses between McLean and Philadelphia were deductible as business expenses?

    Holding

    1. Yes, because Daly’s sales activity was centered in and around Philadelphia, and his residence in McLean was maintained for personal reasons.
    2. No, because Daly’s travel expenses from McLean to Philadelphia were personal and not necessary for the conduct of his business.

    Court’s Reasoning

    The court applied the rule that a taxpayer’s tax home is the principal place of business, not the personal residence, if the residence is maintained for personal reasons. Daly’s sales territory was centered around Philadelphia, where he spent the majority of his business time. His decision to live in McLean was influenced by his wife’s job in Washington, D. C. , and the inconvenience of moving, which were personal choices unrelated to business necessity. The court cited Commissioner v. Flowers (326 U. S. 465 (1946)), emphasizing that deductible travel expenses must be necessary for the conduct of business and not incurred due to personal choice. The court also noted that Daly’s home office work was incidental to his sales activities, which could have been performed in Philadelphia. Therefore, expenses incurred due to his choice to reside in McLean were not deductible.

    Practical Implications

    This decision clarifies that for traveling salesmen and similar professionals, the tax home is typically where the majority of their business activity occurs, not their personal residence if maintained for personal reasons. Practitioners should advise clients to consider the location of their principal place of business when claiming travel deductions. Businesses employing traveling salespeople should be aware of the potential tax implications for their employees’ travel expenses. Subsequent cases have reinforced this principle, affecting how similar claims are analyzed and potentially impacting the tax planning strategies of individuals with significant travel requirements.

  • Rambo v. Commissioner, 72 T.C. 1230 (1979): Determining ‘Home’ for Business Travel Deductions

    Rambo v. Commissioner, 72 T. C. 1230 (1979)

    A taxpayer’s ‘home’ for the purpose of business travel expense deductions under IRC section 162(a)(2) can be a location where the taxpayer has significant ties, even if it is not where the taxpayer works.

    Summary

    In Rambo v. Commissioner, the Tax Court held that Charles Rambo’s cabin in Beehive, Montana, qualified as his ‘home’ for tax deduction purposes despite his employment at temporary job sites across the U. S. and Puerto Rico. Rambo, an accountant, claimed deductions for meals and lodging while away from his Montana cabin, which he maintained as a personal residence and visited during vacations. The court considered various factors, including Rambo’s family ties and consistent return to the cabin, to determine that Beehive was his tax home, allowing him to claim deductions for expenses incurred at his work locations.

    Facts

    Charles Rambo, an accountant for American Bridge Division of United States Steel Corp. , was originally hired in 1961 and worked on projects in Montana, commuting from his cabin in Beehive. After 1962, he was assigned to temporary projects outside Montana. Rambo maintained the Beehive cabin, spending vacations there and keeping significant personal items there. He also had family in Montana, paid state taxes, and intended to retire there. During 1971 and 1972, Rambo worked in Orlando, Florida; San Juan and Poncie, Puerto Rico; and Provo, Utah, claiming deductions for meals and lodging at these locations as expenses incurred away from his ‘home’ in Beehive.

    Procedural History

    Rambo filed for deductions on his 1971 and 1972 tax returns, which the Commissioner disallowed. The case proceeded to the Tax Court, where both parties made concessions, leaving the sole issue of whether Rambo’s Beehive cabin qualified as his ‘home’ for the purpose of section 162(a)(2) deductions.

    Issue(s)

    1. Whether Charles Rambo’s cabin in Beehive, Montana, constituted his ‘home’ within the meaning of IRC section 162(a)(2), allowing him to claim deductions for meals and lodging expenses incurred while working at temporary job sites.

    Holding

    1. Yes, because Rambo maintained significant ties to Beehive, including family connections, consistent returns during vacations, and intention to retire there, making it his tax home.

    Court’s Reasoning

    The court applied the principle that ‘home’ under section 162(a)(2) refers to a taxpayer’s principal place of business or abode. Despite Rambo’s itinerant work pattern, the court found that his ties to Beehive, including his ownership of the cabin, family connections, and consistent return during vacations, outweighed the factors suggesting he was an itinerant worker. The court emphasized that the simplicity of the cabin and its recreational use did not preclude it from being his home. The decision was influenced by previous cases like James v. United States, which recognized the difficulty in distinguishing between personal and business expenses, leading to the allowance of full deductions for those ‘away from home’. The court concluded that Rambo’s situation aligned with the congressional intent behind the deduction to alleviate the burden of duplicated expenses for those required to travel for work.

    Practical Implications

    This decision clarifies that ‘home’ for tax purposes can be a location where the taxpayer has significant personal and familial ties, even if it’s not their primary work location. For legal practitioners, it underscores the importance of demonstrating strong connections to a particular place to justify deductions under section 162(a)(2). Businesses employing itinerant workers may need to consider how this ruling affects their employees’ ability to claim such deductions. The case has been cited in subsequent rulings to differentiate between a taxpayer’s home and temporary work locations, impacting how similar cases are analyzed regarding the deductibility of travel expenses.

  • Bochner v. Commissioner, 64 T.C. 851 (1975): Determining the Tax Home for Temporary Employment Deductions

    Bochner v. Commissioner, 64 T. C. 851 (1975)

    A taxpayer’s tax home for purposes of deducting travel expenses under Section 162(a)(2) is where the taxpayer has substantial continuing living expenses, not merely where the taxpayer desires to return.

    Summary

    In Bochner v. Commissioner, the Tax Court determined that the petitioner, Benjamin G. Bochner, could not deduct travel expenses because Glendora, California, was not his tax home during 1971. Bochner, an engineer, had been laid off from his job in Glendora and took temporary employment in Washington and Massachusetts. Despite retaining an apartment in Glendora, the court found his connections to the area were too minimal to qualify as his tax home. The decision hinges on the requirement that a tax home involves substantial ongoing living expenses and is not merely a place one desires to return to. This case underscores the importance of demonstrating a strong connection to a location to claim it as a tax home for travel expense deductions.

    Facts

    Benjamin G. Bochner, an engineer, was laid off from Aerojet General Corp. in Glendora, California, in February 1970. He continued to rent an apartment in Glendora until January 1971 while seeking new employment. On January 11, 1971, he took temporary work in Richland, Washington, and then in Boston, Massachusetts, from June to September 1971. He returned to Richland for more temporary work in November 1971. Throughout 1971, Bochner maintained his Glendora apartment, hoping to return there, but did not physically return until January 1972 when he obtained permanent employment in Richland. He claimed $9,323. 96 in travel expenses for 1971, which the IRS disallowed, arguing that his tax home was wherever he worked, not Glendora.

    Procedural History

    Bochner filed a petition with the Tax Court challenging the IRS’s disallowance of his travel expense deductions for 1971. The IRS argued that Bochner’s tax home was not Glendora, and thus, his travel expenses were personal living expenses under Section 262, not deductible business expenses under Section 162(a)(2).

    Issue(s)

    1. Whether Glendora, California, was petitioner’s tax home during 1971, thereby entitling him to deduct travel and living expenses incurred in connection with temporary employment away from Glendora.
    2. Whether petitioner substantiated the claimed travel expenditures.
    3. Whether petitioner is entitled to a theft loss deduction for his stolen automobile.

    Holding

    1. No, because petitioner’s connections to Glendora were minimal, and he did not incur substantial continuing living expenses there.
    2. The court did not reach this issue due to the determination that Glendora was not the tax home.
    3. No, because petitioner failed to demonstrate the stolen automobile’s value exceeded the insurance proceeds received.

    Court’s Reasoning

    The court applied the principle that a taxpayer’s tax home for travel expense deductions must be where they incur substantial ongoing living expenses. It distinguished between a tax home and a place one desires to return to, stating, “To hold otherwise would place petitioner’s home where his heart lies and render section 162(a)(2) a vehicle by which to deduct the full spectrum of one’s personal and living expenses. ” The court found that Bochner’s only connection to Glendora was his apartment, which he retained for personal reasons rather than business necessity. The court cited cases like Kenneth H. Hicks and Truman C. Tucker to support the notion that a tax home cannot be based solely on personal desires. The court also noted Bochner’s lack of employment opportunities in Glendora and his absence from the city for most of 1971 as evidence that Glendora was not his tax home. The court did not address the substantiation issue as it was unnecessary given the tax home determination. For the theft loss, the court found Bochner did not prove the car’s value exceeded the insurance payout.

    Practical Implications

    This decision impacts how taxpayers and their legal representatives should approach travel expense deductions under Section 162(a)(2). It emphasizes the need to demonstrate substantial ongoing living expenses at a location to establish it as a tax home. Practitioners must advise clients to maintain strong ties to a location beyond merely retaining a residence, such as having a business connection or family presence. The ruling affects how similar cases involving temporary employment and tax home determination are analyzed, requiring a factual analysis of the taxpayer’s connections to the claimed tax home. For businesses, this case may influence how they structure temporary assignments and support employees in maintaining a tax home. Subsequent cases like Rev. Rul. 73-529 and Rev. Rul. 93-86 have further clarified the tax home concept, but Bochner remains a critical precedent in distinguishing between a tax home and a place one wishes to return to.

  • Foote v. Commissioner, 67 T.C. 1 (1976): Determining Deductibility of Travel and Lodging Expenses for Tax Purposes

    Foote v. Commissioner, 67 T. C. 1 (1976)

    A taxpayer’s home for tax purposes is determined objectively by their principal place of business, affecting the deductibility of travel and lodging expenses.

    Summary

    In Foote v. Commissioner, the U. S. Tax Court ruled on the deductibility of lodging and travel expenses for Virginia and Lou Foote. The couple owned a ranch near Lockhart, Texas, but lived in Austin, where Virginia worked as a school counselor. The court held that Virginia’s Austin lodging expenses were not deductible because Austin was her tax home. Lou’s expenses for lodging in Austin and commuting to the ranch were also non-deductible; the court determined that Lockhart was his tax home, but his Austin stay was for personal reasons, not business necessity. This decision underscores the importance of the objective test in determining a taxpayer’s home for tax purposes and the non-deductibility of personal commuting expenses.

    Facts

    Virginia and Lou Foote owned a 320-acre ranch near Lockhart, Texas, about 30 miles from Austin. They previously lived on the ranch but moved to Austin in 1964 when Virginia took a job as a counselor with the Austin Independent School District, which required her to maintain an Austin address. During the 1972 school year, they lived in a trailer in Austin during the week and spent weekends at the ranch. Lou operated the ranch but was unable to employ someone to live there full-time. He made daily round trips from Austin to the ranch to care for the livestock. The Footes claimed deductions for their Austin lodging and Lou’s travel expenses between Austin and Lockhart on their 1972 tax return.

    Procedural History

    The Commissioner of Internal Revenue determined a deficiency in the Footes’ 1972 federal income tax. The Footes petitioned the U. S. Tax Court, which heard the case and issued its decision on October 4, 1976.

    Issue(s)

    1. Whether Virginia Foote can deduct her expenditures for lodging in Austin as traveling expenses under section 162(a)(2) of the Internal Revenue Code of 1954.
    2. Whether Lou Foote can deduct his automobile expenses incurred in traveling between Austin and the ranch in Lockhart as trade or business expenses.

    Holding

    1. No, because Austin was Virginia’s tax home, and she was not “away from home” for tax purposes while living there.
    2. No, because Lou’s travel expenses were nondeductible commuting expenses, as he chose to live in Austin for personal reasons, not because his business required it.

    Court’s Reasoning

    The court applied an objective test to determine the Footes’ tax home, stating that a taxpayer’s home is generally where their principal place of business is located. For Virginia, Austin was her tax home because it was her primary place of employment. The court cited Commissioner v. Flowers, establishing that travel expenses must be reasonable, incurred while away from home, and in pursuit of a trade or business. Virginia’s lodging expenses in Austin were deemed personal and nondeductible. For Lou, the court determined that Lockhart was his tax home, but his presence in Austin was due to personal reasons (to be with his wife), not business necessity. Thus, his lodging expenses in Austin were also nondeductible. The court also ruled that Lou’s daily travel to the ranch was commuting and not deductible. The court rejected the argument that maintaining two homes due to employment considerations justified deductions, citing cases like Robert A. Coerver and Arthur B. Hammond, where similar arguments were dismissed.

    Practical Implications

    This decision reinforces the objective test for determining a taxpayer’s home for tax purposes, impacting how legal professionals advise clients on the deductibility of travel and lodging expenses. It clarifies that expenses related to maintaining a second home due to employment or family considerations are generally nondeductible. Practitioners must advise clients to consider their primary place of business when claiming deductions for lodging and travel. The ruling also affects how businesses structure employee compensation packages, particularly for those with multiple residences. Subsequent cases like Fausner v. Commissioner have continued to uphold the principles established in Foote, emphasizing the non-deductibility of commuting expenses regardless of the distance traveled.

  • Tucker v. Commissioner, 55 T.C. 783 (1971): When Duplicate Living Expenses Due to Personal Choice Are Nondeductible

    Tucker v. Commissioner, 55 T. C. 783 (1971)

    Duplicate living expenses incurred due to personal choice rather than business necessity are not deductible under Section 162(a)(2).

    Summary

    Truman C. Tucker, a teacher, maintained his family residence in Knoxville, Tennessee, but accepted temporary teaching positions in Georgia and North Carolina due to lack of local opportunities. He incurred duplicate living expenses while working away from Knoxville. The Tax Court held that these expenses were nondeductible under Section 162(a)(2) because they resulted from Tucker’s personal choice to keep his family residence in Knoxville rather than business necessity. The court reasoned that a taxpayer’s tax home is generally where their principal place of employment is located, and Tucker’s choice to live separately from his work location was personal, not dictated by his trade or business.

    Facts

    Truman C. Tucker and his family resided on a farm near Knoxville, Tennessee. After graduating from college, Tucker sought a teaching position in Knoxville but was unable to find one. He accepted a temporary teaching position in Dade County, Georgia, for the 1966-1967 school year, and another in Murphy, North Carolina, for the 1967-1968 school year. His wife and child remained in Knoxville, where his wife was employed. Tucker incurred duplicate living expenses while working in Georgia and North Carolina, totaling $1,330 in 1967. He returned to Knoxville after the school year in Georgia and left the North Carolina position early due to the burden of duplicate expenses.

    Procedural History

    Tucker filed a joint federal income tax return for 1967 and claimed a deduction for his living expenses while working in Georgia and North Carolina. The Commissioner of Internal Revenue determined a deficiency and disallowed the deduction. Tucker petitioned the Tax Court, which held that the expenses were nondeductible, siding with the Commissioner.

    Issue(s)

    1. Whether Tucker was “away from home in the pursuit of a trade or business” within the meaning of Section 162(a)(2) while teaching in Georgia and North Carolina, allowing him to deduct his living expenses.

    Holding

    1. No, because Tucker’s duplicate living expenses were incurred due to his personal choice to maintain his family residence in Knoxville rather than the demands of his trade or business.

    Court’s Reasoning

    The court applied the principle from Commissioner v. Flowers that travel and living expenses must be necessitated by the exigencies of the taxpayer’s business, not personal convenience. Tucker had no business ties to Knoxville, and his employment opportunities there were bleak. The court distinguished between temporary employment, which may justify maintaining two residences, and Tucker’s situation, where his choice to keep his family in Knoxville was personal. The court emphasized that a taxpayer’s “home” for tax purposes is generally where their principal place of employment is located. The majority opinion, supported by a concurrence, rejected the argument that Tucker’s jobs were temporary enough to justify the deduction, as his personal choice to maintain a separate residence was not dictated by business necessity.

    Practical Implications

    This decision clarifies that taxpayers cannot deduct duplicate living expenses incurred due to personal choice rather than business necessity. It impacts how similar cases should be analyzed, emphasizing that a taxpayer’s tax home is generally where their principal place of employment is located, not necessarily where their family resides. Legal practitioners must advise clients that maintaining a separate residence for personal reasons does not justify a deduction under Section 162(a)(2). The ruling may affect teachers and other professionals who work away from their family’s residence, as it underscores the importance of aligning one’s tax home with their primary place of employment. Subsequent cases, such as Hollie T. Dean and Laurence P. Dowd, have been distinguished from this ruling, highlighting the need for clear evidence of business necessity for such deductions.