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TAX COURT: HOME'S NOT WHERE THE HEART IS

June 14, 2007

Home is where the work is, not the heart. The tax home, anyway. That's the lesson from a quartet of Tax Court cases yesterday involving Northwest Airlines mechanics.

The Northwest employees all took jobs in new locations in place of accepting layoffs in 2003. They retained their old homes in hopes of returning. For example, Stanley Wasik had to take a position in Milwaukee after spending years working in Minneapolis. He kept his home in Prior Lake, Minnesota. His wife and kids stayed behind in Minneapolis.

The tax law allows you to claim meals and lodging expenses while you are "away from home" on business. Unfortunately for the mechanics, your "home" for tax purposes is generally where you work. As the Tax Court explains:

A taxpayer may deduct the expenses he or she incurred while away from home. Sec. 162(a)(2). The word "home" for purposes of section 162(a)(2) has a special meaning. It generally refers to the area of a taxpayer's principal place of employment, not the taxpayer's personal residence. Daly v. Commissioner, 72 T.C. 190, 195 (1979), affd. 662 F.2d 253 (4th Cir. 1981); Kroll v. Commissioner, supra at 561-562.

There is an exception to the general rule that a taxpayer's tax home is his or her principal place of employment. Peurifoy v. Commissioner, 358 U.S. 59, 60 (1958). The taxpayer's tax home may be the taxpayer's personal residence if the taxpayer's employment away from home is temporary. Id.; Mitchell v. Commissioner, T.C. Memo. 1999-283. On the other hand, the exception does not apply and the taxpayer's tax home remains the principal place of employment if the employment away from home is indefinite. Kroll v. Commissioner, supra at 562.

Mr. Wasik wanted to return to Minneapolis, but under the Northwest seniority rules he had to wait his turn. The court ruled that because the assignment was indefinite, with no assured or likely return date, that he was "at home" in Milwaukee for tax purposes, and his living costs there were non-deductible. His fellow mechanics also lost their cases.

The moral? When it comes to travel expenses, you live at work, not with the family.

Cites:

Wasik, T.C. Memo. 2007-148;
McKeown, T.C. Summ. Op. 2007-95;
Stephens, T.C. Summ. Op. 2007-94
Stockwell, T.C. Memo. 2007-149

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