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'Indefinite' doesn't mean 'temporary'

February 04, 2010

Tough times force us to be flexible. Tough times forced an out-of-work electrician in Lake Mary, Florida to take a job 200 miles away in Delray Beach. The Tax Court picks up the story:

Although the position was permanent, petitioner intended it to be an interim position while he pursued other employment opportunities.

...

From August through December 2006 petitioner drove between Lake Mary and Delray Beach. Petitioner drove to Delray Beach at the beginning of the work week and stayed in a motel during the week. Petitioner returned to Lake Mary on the weekends so as not to incur additional motel costs for days he was not working. The 5 days a week petitioner was in Delray Beach he stayed at a motel. In mid-December 2006 petitioner signed a 1-year lease for an apartment in Delray Beach.

In September 2007 petitioner left his position with Meisner for a position with M.J. Electrical based out of Iron Mountain, Michigan. Petitioner began his employment with M.J. Electrical in Topeka, Kansas, but at the time of trial worked for that company in Morgantown, West Virginia.

The tax law allows you to deduct travel costs of work assignments when you are "temporarily" away from your "tax home." That means you have to be both "away from your tax home" and the assignment has to be "temporary." The Tax Court explains the tests (citations omitted):

As a general rule, a taxpayer's tax home is determined by the location of the taxpayer's principal place of employment, regardless of where the taxpayer's personal residence is located. Under an exception to the general rule, a taxpayer's personal residence may be his tax home where the taxpayer is away from home on a temporary rather than indefinite basis. The flush language of section 162(a) provides that a "taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year."

Employment is defined as "temporary" only if the taxpayer can foresee its termination within a reasonably short period of time or it is for a fixed duration. Indefinite employment is employment where the prospect is that the work will continue for an indefinite and substantially long period.

The electrician's "tax home" became his place of employment when he took the full-time position in Delray Beach, even though he commuted from far away:

Given the circumstances surrounding his employment with Meisner, we can understand why petitioner might consider his position "temporary", as that word is used in common parlance. After all, at all relevant times it was his intention to resign the position with Meisner as soon as possible for business as well as personal reasons.

Nevertheless, the position with Meisner was a permanent position with no foreseeable terminus. When petitioner accepted the position with Meisner, he had a reasonable expectation that the position would, and it in fact did, last more than 1 year... Petitioner kept his residence in Lake Mary for reasons of personal choice despite, rather than because of, the exigencies of his trade or business.

Consequently, because petitioner's position with Meisner in Delray Beach was an indefinite position, Delray Beach was his tax home for the relevant period. Because petitioner was not "away from home" within the meaning of section 162(a)(2) while in Delray Beach, he is not entitled to a deduction for vehicle expenses, lodging, and meals and incidentals incurred as a result of his position in Delray Beach. Instead, his costs were in the nature of personal or living expenses. We thus sustain respondent's determination on this issue.

Bottom line? No deduction for travel from Lake Mary and for the motel bills in Delray Beach.

The Moral? Indefinite isn't temporary, and your tax home is where your job is.

Cite: Durrance, T.C. Summ. Op. 2010-12

Tags: Tax court.tax home.temporary assignments.

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