ори
eedings consistent with this
Revenue Ruling 99-7
1999-1 C.B. 361.
ISSUE
incurred by a taxpayer in going between the taxpayer's residence and a
Under what circumstances are daily transportation expenses
work location deductible under $ 162(a) of the Internal Revenue Code?
LAW AND ANALYSIS
Section 162(a) allows a deduction for all the ordinary and necessary
expenses paid or incurred during the taxable year in carrying on any
trade or business. Section 262, however, provides that no deduction is
allowed for personal, living, or family expenses.
A taxpayer's costs of commuting between the taxpayer's residence
and the taxpayer's place of business or employment generally are
nondeductible personal expenses under $$ 1.162–2(e) and 1.262–1(b)(5)
of the Income Tax Regulations. However, the costs of going between one
business location and another business location generally are deductible
under $162(a). Rev.Rul. 55–109, 1955-1 C.B. 261.
Section 280A(C)(1)(A) provides, in part, that a taxpayer may
deduct expenses for the business use of the portion of the taxpayer's
personal residence that is exclusively used on a regular basis as the
principal place of business for any trade or business of the taxpayer. (In
the case of an employee, however, such expenses are deductible only if
the exclusive and regular use of the portion of the residence is for the
convenience of the employer.) [See Chapter 17D, infra. Ed.] In Curphey
V. Commissioner, 73 T.C. 766 (1980), the Tax Court held that daily
transportation expenses incurred in going between an office in a
taxpayer's residence and other work locations were deductible where the
home office was the taxpayer's principal place of business within the
meaning of g 280A(C)(1)(A) for the trade or business conducted by the
***
derived from each place. Markey, 490 F.2d at 1255. The first factor would ordinarily be the most
important, since the time spent as a business necessity at the location is a reasonable proxy for
F.2d at 1252; Sherman v. Commissioner, 16 T.C. 332 (1951) (amount of income derived from
the amount of living expenses that business requires be incurred in each place. See Markey, 490
activity at each location not controlling); Rev.Rul. 82, 1963-1 C.B. 33; Rev.Rul. 67, 1961-1, C.B.
25. We recognize, however, that other factors might be considered or even found determinative
appropriate circumstances.
under
372
PART 4
DEDUCTIONS IN COMPUTING TAXABLE INCOME
taxpayer at those other work locations. The court stated that “[w]e see no
reason why the rule that local transportation expenses incurred in travel
between one business location and another are deductible should not be
equally applicable where the taxpayer's principal place of business with
respect to the activities involved in his residence." .73 T.C. at 777-778
(emphasis in original). Implicit in the court's analysis in Curphey is that
the deductibility of daily transportation expenses is determined on a
business-by-business basis.
Rev.Rul. 190, 1953-2 C.B. 303, provides a limited exception to the
general rule that the expenses of going between a taxpayer's residence
and a work location are nondeductible commuting expenses. Rev.Rul. 190
deals
with a taxpayer who lives and ordinarily works in a particular
metropolitan area but who is not regularly employed at any specific work
location. In such a case, the general rule is that daily transportation
expenses are not deductible when paid or incurred by the taxpayer in
going between the taxpayer's residence and a temporary work site inside
that metropolitan area because that area is considered the taxpayer's
regular place of business. However, Rev.Rul. 190 holds that daily
transportation expenses are deductible business expenses when paid or
incurred in going between the taxpayer's residence and a temporary work
site outside that metropolitan area.
Rev.Rul. 90–23, 1990-1 C.B. 28, distinguishes Rev.Rul. 190 and
holds, in part, that, for a taxpayer who has one or more regular places of
business, daily transportation expenses paid or incurred in going
between the taxpayer's residence and temporary work locations are
deductible business expenses under $ 162(a), regardless of the distance.
Rev.Rul. 94-47, 1994–2 C.B. 18, amplifies and clarifies Rev.Rul. 190
and Rev.Rul. 90–23, and provides several rules for determining whether
daily transportation expenses are deductible business expenses under
$ 162(a). Under Rev.Rul. 94–47, a taxpayer generally may not deduct
daily transportation expenses incurred in going between the taxpayer's
residence and a work location. A taxpayer, however, may deduct daily
transportation expenses incurred in going between the taxpayer's
residence and a temporary work location outside the metropolitan area
where the taxpayer lives and normally works. In addition, Rev.Rul. 94-
47 clarifies Rev.Rul. 90–23 to provide that a taxpayer must have at least
one regular place of business located "away from the taxpayer's
residence" in order to deduct daily transportation expenses incurred in
going between the taxpayer's residence and a temporary work location in
the same trade or business regardless of the distance. In this regard,
Rev.Rul. 94-47 also states that the Service will not follow the decision in
Walker v. Commissioner, 101 T.C. 537 (1993). Finally, Rev.Rul. 94-47
amplifies Rev.Rul. 190 and Rev.Rul. 90-23 to provide that, if the
taxpayer's residence is the taxpayer's principal place of business within
the meaning of $ 280A(C)(1)(A), the taxpayer may deduct daily
transportation expenses incurred in going between the taxpayer's
373
CHAPTER 14
defined
temp work,
location"
BUSINESS DEDUCTIONS
residence and another work location in the same trade or business
regardless of whether the other work location is regular or temporary and
regardless of the distance.
For purposes of both Rev.Rul. 90-23 and Rev.Rul. 94-47, a
temporary work location is defined as any location at which the taxpayer
performs services on an irregular or short-term (i.e., generally a matter
of days or weeks) basis. However, for purposes of determining whether
daily transportation expense allowances and per diem travel allowances
for meal and lodging expenses are subject to income tax withholding
under $ 3402, Rev.Rul. 59-371, 1959-2 C.B. 236, provides a l year
standard to determine whether a work location is temporary. Similarly,
for
purposes of determining the deductibility of travel away-from-home
expenses under $ 162(a)(2), Rev.Rul. 93-86, 1993-2 C.B. 71, generally
provides a 1-year standard to determine whether a work location will be
treated as temporary.
The Service has reconsidered the definition of a temporary work
location in Rev.Rul. 90-23 and Rev.Rul. 94-47, and will replace the
"irregular or short-term (i.e., generally a matter of days or weeks) basis"
standard in those rulings with a 1-year standard similar to the rules set
forth in Rev.Rul. 59-371 and Rev.Rul. 93–86.
If an office in the taxpayer's residence satisfies the principal place of
business requirements of $ 280A(C)(1)(A), then the residence is
considered a business location for purposes of Rev. Rul. 90–23 or Rev.Rul.
94-47.
In these circumstances, the daily transportation expenses
incurred in going between the residence and other work locations in the
same trade or business are ordinary and necessary business expenses
(deductible under $ 162(a)). See Curphey; see also Wisconsin Psychiatric
Services v. Commissioner, 76 T.C. 839 (1981). In contrast, if an office in
the taxpayer's residence does not satisfy the principal place of business
requirements of $ 280A(C)(1)(A), then the business activity there (if any)
is not sufficient to overcome the inherently personal nature of the
residence and the daily transportation expenses incurred in going
between the residence and regular work locations. In these
circumstances, the residence is not considered a business location for
purposes of Rev.Rul. 90–23 or Rev.Rul. 94–47, and the daily
transportation expenses incurred in going between the residence and
regular work locations are personal expenses (nondeductible under
$S 1.162-2(e) and 1.262-1(b)(5)). See Green v. Commissioner: 59 T.C. 456
(1972); Fryer v. Commissioner, T.C. Memo 1974–77.
For purposes of determining the deductibility of travel-away-from-
home
expenses
under $ 162(a)(2), Rev.Rul. 93-86 blefines "home") as the
"taxpayer's regular or principal (if more than one regular) place of
business." See Daly u. Commissioner, 72 T.C. 190 (1979), affd, 662 F.2d
253 (4th Cir.1981); Flowers v. Commissioner, 326 U.S. 465 (1946), 1946-
1 C.B. 57.
defined
"home"
374
DEDUCTIONS IN COMPUTING TAXABLE INCOME
HOLDING
PART 4
are
In general, daily transportation expenses incurred in going between
a taxpayer's residence and a work location are nondeductible commuting
expenses. However, such expenses
deductible under the
circumstances described in paragraph (1), (2), or (3) below.
(1) A taxpayer may deduct daily transportation expenses incurred
in going between the taxpayer's residence and temporary work location
outside the metropolitan area where the taxpayer lives and normally
works. However, unless paragraph (2) or (3) below applies, daily
transportation expenses incurred in going between the taxpayer's
residence and a temporary work location within that metropolitan area
are nondeductible commuting expenses.
(2) If a taxpayer has one or more regular work locations away from
the taxpayer's residence, the taxpayer may deduct daily transportation
expenses incurred in going between the taxpayer's residence and a
temporary work location in the same trade or business, regardless of the
distance. (The Service will continue not to follow the Walker decision.)
(3) If a taxpayer's residence is the taxpayer's principal place of
business within the meaning of g 280A(C)(1)(A), the taxpayer may deduct
daily transportation expenses incurred in going between the residence
and another work location in the same trade or business, regardless of
whether the other work location is regular or temporary and regardless
of the distance.
For purposes of paragraphs (1), (2), and (3), the following rules apply
in determining whether a work location is temporary. If employment at
a work location is realistically expected to last (and does in fact last) for
1 year or less, the employment is temporary in the absence of facts and
circumstances indicating otherwise. If employment at a work location is
realistically expected to last for more than 1 year or there is no realistic
expectation that the employment will last for 1 year or less, the
employment is not temporary, regardless of whether it actually exceeds 1
year. If employment at a work location initially is realistically expected
to last for 1 year or less, but at some later date the employment is
realistically expected to exceed 1 year, that employment will be treated
as temporary in the absence of facts and circumstances indicating
otherwise) until the date that the taxpayer's realistic expectation
changes, and will be treated as not temporary after that date.
The determination that a taxpayer's residence is the taxpayer's
principal place of business within the meaning of $ 280A(C)(1)(A) is not
necessarily determinative of whether the residence is the taxpayer's tax
home for other purposes, including the travel-away-from-home deduction
under $ 162(a)(2).
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