"Traveling Away From Home" Court Case 7th Circuit

Posted by Alan on January 27, 2009, 11:44 am

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I found the court case cited below to be of interest to those of
you who deal with the deductibility of travel as a business
expense. This the first case I know of where a Circuit Court has
rejected many of the arguments used by the Tax Court in judging
when travel away from home is deductible. Specifically, the court
rejects the temporary or indefinite decision process and the
personal choice vs reasonableness response to employment
situation argument. The court falls back to two very old court
cases for its argument.
Hantzis vs Comm'r, 638 F.2d 248 (1st Circ. 1981)
Commissioner v. Flowers, 326 U.S. 465, 474 (1946)

Both of these decisions focused on the “business exigencies”
rule: ".... unless the taxpayer has a business rather than a
personal reason to be living in two places he cannot
deduct his traveling expenses if he decides not to move."

http://www.ca7.uscourts.gov/fdocs/docs.fwx?submit=showbr&shofile=08-2169_003.pdf

Wilbert vs. Comm'r, CA-7, 2009-1 USTC ¶50,171 Affirming the Tax
Court, 93 TCM 1363

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Posted by Dick Adams on January 27, 2009, 8:52 pm

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> I found the court case cited below to be of interest to those of

> you who deal with the deductibility of travel as a business

> expense. This the first case I know of where a Circuit Court has

> rejected many of the arguments used by the Tax Court in judging

> when travel away from home is deductible. Specifically, the court

> rejects the temporary or indefinite decision process and the

> personal choice vs reasonableness response to employment

> situation argument. The court falls back to two very old court

> cases for its argument.

> Hantzis vs Comm'r, 638 F.2d 248 (1st Circ. 1981)

> Commissioner v. Flowers, 326 U.S. 465, 474 (1946)

> Both of these decisions focused on the "business exigencies"

> rule: ".... unless the taxpayer has a business rather than a

> personal reason to be living in two places he cannot

> deduct his traveling expenses if he decides not to move."

http://tinyurl.com/cykkpm

> Wilbert vs. Comm'r, CA-7, 2009-1 USTC 50,171 Affirming the Tax

> Court, 93 TCM 1363

Thank you for posting this, Alan.

I do not care for this decision at a personal level. It's my
impression that Judge Posner wasn't thrilled with it either.
But he continues his reputation for clear, comprehensive, and
rational opinions.

Dick

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Posted by Stuart A. Bronstein on January 28, 2009, 2:38 pm

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rdadams@panix.com (Dick Adams) wrote:

>> I found the court case cited below to be of interest to those of

>> you who deal with the deductibility of travel as a business

>> expense. This the first case I know of where a Circuit Court has

>> rejected many of the arguments used by the Tax Court in judging

>> when travel away from home is deductible. Specifically, the court

>> rejects the temporary or indefinite decision process and the

>> personal choice vs reasonableness response to employment

>> situation argument. The court falls back to two very old court

>> cases for its argument.

>> Hantzis vs Comm'r, 638 F.2d 248 (1st Circ. 1981)

>> Commissioner v. Flowers, 326 U.S. 465, 474 (1946)

>> Both of these decisions focused on the "business exigencies"

>> rule: ".... unless the taxpayer has a business rather than a

>> personal reason to be living in two places he cannot

>> deduct his traveling expenses if he decides not to move."

> Thank you for posting this, Alan.

> I do not care for this decision at a personal level. It's my

> impression that Judge Posner wasn't thrilled with it either.

> But he continues his reputation for clear, comprehensive, and

> rational opinions.

I agree that on a policy level (family values and all that) the
outcome is not the way I would prefer it. However the opinion is an
excellent analysis of the law, and probably the "correct" decision
based on the law.

Stu

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Posted by Dick Adams on January 29, 2009, 1:11 pm

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> I agree that on a policy level (family values and all that) the

> outcome is not the way I would prefer it. However the opinion is an

> excellent analysis of the law, and probably the "correct" decision

> based on the law.

This brings us to the consultant who subcontracts from various
contractors for anywhere from six months to a year at a time.
He returns home every weekend and his expenses are billed to
the end user. Let's assume he is in his late 30's with a
stay-at-home wife and four children ages 6 mos to 7 yrs old.
He catchs a very early Monday morning flight to the end user
and an afternoon flight home. His only reason for returning
home is that it is his tax home.

The facts reamin the same except that he takes on a two year
project that could be indefinite. He gets per deim under an
accountable plan under whish he rents an apartment near the
end-user site. He gets a W-2 because the infamous Section
1702 of the 1986 Tax Act makes him an employee of the contractor
and he never sees a 1099 for his expenses.

Why should he treated differently from any other W-2 employee
who pays these expenses himself?

Dick

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Posted by Steve Pope on January 29, 2009, 1:35 pm

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>This brings us to the consultant who subcontracts from various

>contractors for anywhere from six months to a year at a time.

>He returns home every weekend and his expenses are billed to

>the end user. Let's assume he is in his late 30's with a

>stay-at-home wife and four children ages 6 mos to 7 yrs old.

>He catchs a very early Monday morning flight to the end user

>and an afternoon flight home. His only reason for returning

>home is that it is his tax home.

>The facts reamin the same except that he takes on a two year

>project that could be indefinite. He gets per deim under an

>accountable plan under whish he rents an apartment near the

>end-user site. He gets a W-2 because the infamous Section

>1702 of the 1986 Tax Act makes him an employee of the contractor

>and he never sees a 1099 for his expenses.

>Why should he treated differently from any other W-2 employee

>who pays these expenses himself?

Because if there was not an underlying intent to treat employees
and the self-employed differently for tax purposes, they wouldn't
define these to be two different entities in the first place.

Disallowing the deduction for single-day plane travel, for
self-employed individuals for whom their home is not
a place of business, does seem particularly unfair but
those are the rules, last time I read them.

Steve

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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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