Where is the Taxpayer?s Tax Home?
A.
Being on business travel status allows the entire cost of lodging,
incidental expenses and 50% of meal expenses as a deductible expense;
and the cost of the trip doesn't result in taxable income to an
employee who is reimbursed under an accountable plan [Section
162(a)(2)].
B.
A business trip has the status of business travel only if the trip
involves overnight travel; and the employee travels away from his tax
home.
1.
To satisfy the overnight requirement, the trip must be of such a length
as to require sleep or rest to enable the taxpayer to continue working.
2.
An employee's tax home is his regular place of business, regardless of
where he maintains his family home, and generally includes the entire
city or general area in which his business or work is located.
C.
If an employee has regular work in two or more locations, his tax home
is the location of his principle business of employment; and the
following factors are considered in making that determination:
1. The time ordinarily spent in each location for business purposes;
2. The amount of business activity in each location; and
3. The income earned in each location.
D.
There are some situations where, due to constant traveling, an employee
does not have a tax home other than the place in which he is working at
the time; and in such cases, taxpayer cannot claim travel expense
deductions.
E.
The IRS has adopted, in a compromise position, a three-point test for
determining whether taxpayer without a principal place of business, has
a tax home at his residence.
F. Tax Home Test ? Revenue Ruling 73-529
1.
Whether a portion of the taxpayer's business activity is performed in
the vicinity of his residence, and whether the residence is used at the
time the work is performed.
2.
Whether the taxpayer's living expenses incurred at his residence are
duplicated because his business requires him to be away from home; and
3.
Whether the taxpayer hasn't abandoned the vicinity in which both the
historical place of lodgine and residence are located, or has family
members currently residing at his residence, or uses the residence
frequently for purposes of lodging.
G. The guidelines for applying the tax home test are as follows:
1.
If all three factors are satisfied, employee has a tax home at his
principal home where he regularly lives and may have deductible travel
expense.
2. If only two of the factors are satisfied, employee may have a tax home depending on all the facts and circumstances.
3.
If only one of the factors is satisfied, employee has not tax home; his
tax home is located wherever he happens to be, and this results in a
loss of meals and lodging deductions.
H.
Although the IRS and the Tax Court maintain that a taxpayer's tax home
is his principal place of business, the definition of tax home remains
in dispute.
1. The Fourth and District of Columbia Circuits accept the above definition of tax home.
2. The Fifth and Ninth Circuits define a taxpayer's tax home as his residence.
3.
The First, Second, Sixth and Eighth Circuits tax a middle of the road
position, by holding that a person?s tax home is determined from all
the facts and circumstances.
