Rev. Rul. 61-221

The Internal Revenue Service will follow the recent decision of the United States Court of Appeals for the Fifth Circuit in F. M. Williams v. George D. Patterson, 286 Fed. (2d) 333 (1961).

The issue in that case was whether a railroad conductor who was assigned to regularly scheduled trains running between his home terminal in Montgomery, Alabama, and Atlanta, Georgia, and whose round trips usually required a 16-hour absence from Montgomery and included a six-hour layover in Atlanta--during which he habitually ate two meals and rented a hotel room where he slept and bathed before starting his return trip--could deduct the cost of such meals, lodging and tips as traveling "away from home" expenses under section 162(a)(2) of the Internal Revenue Code of 1954.

The Service had contended that the taxpayer was not away from home on such trips because they were not "overnight" trips, as that term is explained in Revenue Ruling 54-497, C.B. 1954-2, 75, at 78-79, for the reason that Williams' trips did not necessitate his absence from his home terminal for a minimum period which lasted substantially longer than an ordinary days' work and during which his duties required him to obtain necessary sleep in Atlanta.

The court concluded, however, that Williams had satisfied the dual test prescribed by the Service since his 16-hour absence on such round trips (including one hour for discharging his duties before leaving, and after returning to, his home terminal) was substantially longer than an ordinary workday, and it was reasonably necessary for Williams to sleep during his layover in order to carry out his assignment, even though there was no statute, regulation or railroad order requiring him to sleep and rest prior to his return run.

The Service agrees with the court in interpreting Revenue Ruling 54-497 as allowing the deduction in this case and concurs in general with the court's understanding that the "correct rule" governing the deductibility of such expenses is as follows:

If the nature of the taxpayer's employment is such that when away from home, during released time, it is reasonable for him to need and to obtain sleep or rest in order to meet the exigencies of his employment or business demands of his employment, his expenditures (including incidental expenses, such as tips) for the purpose of obtaining sleep or rest are deductible traveling expenses under section 162(a)(2) of the 1954 Code.

However, the Service does not consider the brief interval during which an employee may be released from duty for the purpose of eating rather than sleeping as constituting an adequate rest period to satisfy the "overnight" rule as a test for the deductibility of meal expenses on business trips completed within one day. See Sam J. Herrin, et ux. v. Commissioner, 28 T.C. 1303(1957); and Allan L. Hanson, et ux. v. Commissioner, 35 T.C. 413(1960).

¹ Based on Technical Information Release 344, dated November 2, 1961.