Rev. Rul. 60-189

Advice has been requested as to the deductibility, for Federal income tax purposes, of traveling expenses incurred by taxpayers employed for various periods of time on construction work at points distant from the places where they maintain their residences and usually work or make their employment contacts.

The following cases are understood to be typical in this area:

Case (1) : The taxpayer is a construction worker, such as a welder. He is not regularly or continously employed by any single concern. He is a member of the local union for his trade in a particular city and maintains his regular place of abode in or near that city. He usually works in and around that city when work is available there, but, at times, because of a shortage of work there or for other valid business reasons, he accepts employment elsewhere for various periods. The location and duration of his employments elsewhere require him to obtain lodging near each such project site, but none of his distant employments is expected to extend or does in fact extend for as long as one year at any particular location.

Case (2) : This case differs in its facts from that described in Case (1) mainly in that for a substantial period the taxpayer has rarely worked in or near the city where he maintains his union membership and regular place of abode. He does, however, utilize his local union to obtain work wherever it is available. For valid business reasons he accepts employment away from the city in which he usually makes his employment contacts, none of his employments elsewhere being expected to extend or in fact extending for as long as one year at any particular location. This taxpayer is not generally considered in the industry to be an itinerant worker, or `boomer,' because he maintains his regular place of abode in or near the city of his local union and usually obtains his referrals there for procuring employment at other locations.

The basic statutory provisions to be considered in determining the deductibility of traveling expenses are sections 162(a) and 262 of the Internal Revenue Code of 1954. Section 162(a) provides for the deduction of all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Among the examples of ordinary and necessary business expenses explicitly mentioned by Congress in that section are `traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business.' On the other hand, section 262 specifies that, with certain exceptions not here material, no deduction shall be allowed for personal, living, or family expenses.

The identical deduction for business traveling expenses was first provided for in section 214(a) of the Revenue Act of 1921. Treasury regulations interpreting this and like provisions have consistently provided, in pertinent part, that traveling expenses, including the cost of meals and lodging, are deductible as business expenses if the trip is made solely on business, but are nondeductible personal or living expenses if the trip is undertaken for other than business purposes; that only such expenses as are reasonable and necessary in the conduct of the business and directly attributable to it may be deducted; and that commuters' fares are not deductible. See, for example, article 101(a) of Regulations 62; sections 39.23(a)-2(a), (f), and (i) of Regulations 118; and sections 1.162-2(a) and (e) of the current Income Tax Regulations. This interpretation has remained substantially unchanged throughout successive reenactments of the statute and has therefore been said by the Supreme Court of the United States to possess implied legislative approval and to have the effect of law. Commissioner v. J. N. Flowers , 326 U.S. 465, Ct. D. 1659, C.B. 1946-1, 57.

In the Flowers case the Supreme Court further declared that before a traveling expense may be deducted as a business expense, all three of the following conditions must be satisfied: (1) the expense must be a reasonable and necessary traveling expense, (2) it must be incurred `while away from home,' and (3) it must be incurred `in pursuit of business.' The first requirement for deductibility poses few major problems and will not be considered here. The problems inherent in the second condition were not resolved by the Supreme Court in the Flowers case since it found that the expenses there were not incurred `in pursuit of business' and failed to satisfy the third condition. Both the second and third conditions will be discussed here, however, since it is necessary to determine whether the taxpayers here in question incur their traveling expenses `while away from home' as well as whether such expenses are incurred `in pursuit of business,' within the meaning of section 162(a) of the Code.

The location of a taxpayer's `home,' though noncontroversial in the ordinary case, has been a highly controversial problem in a number of litigated cases in which the taxpayer lived in one city but worked in another. In such cases it has been necessary for the courts to construe the term `home' in accord with the basic purposes of sections 162 and 262 of the Code (and corresponding earlier provisions) which allow the deduction of a taxpayer's expenses in carrying on his trade or business, but deny any deduction for his personal, living, or family expenses.

Since 1927, following the decision in Mort L. Bixler v. Commissioner , 5 B.T.A. 1181, the location of a taxpayer's `home' for traveling expense purposes in this controversial area has generally been held to be at, or in the vicinity of, his place of business or employment. (Such location is frequently called his post of duty and is at times referred to as his tax or business `home.') The great majority of court decisions considering the meaning of `home' have sustained this interpretation for the reason, among others, that `the statute implies that the home and the place of business must be in the same general locality' and because Congress did not intend `to allow as a business expense those outlays which are not caused by the exigencies of the business but by the action of the taxpayer in having his home, for his own convenience, at a distance from his business.' See Maurice Victor Barnhill et al. v. Commissioner , 148 Fed.(2d) 913, Ct. D. 1646, C.B. 1945, 96.

Two major refinements of the basic rule that a taxpayer's `home' is located at his post of duty have long been recognized. In line with the 1928 decision in Walter F. Brown v. Commissioner , 13 B.T.A. 832, acquiescence, C.B. VIII-1, 6 (1929), a taxpayer who has two occupations (or who is carrying on a single occupation at two continuing posts of duty) which require him to spend a substantial amount of time in each of two cities is held to have his `home' at his principal business location. Rev. Rul. 54-147, C.B. 1954-1, 51; Rev. Rul. 55-604, C.B. 1955-2, 49. The second such refinement, of more importance here, had its otigin in the 1943 decision in Charles D. Coburn v. Commissioner , 138 Fed.(2d) 763, which holds that a taxpayer continues to have his `home' at his regular post of duty if only temporarily employed at a location away from `the place where he is regularly employed or customarily carries on business during the taxable year.'

If a taxpayer has no `home' for traveling expense purposes, it cannot be said that he is `away from home.' It is likewise evident that a taxpayer cannot be `away from home' if his only `home' is wherever he happens to be working. Thus, a taxpayer cannot deduct the cost of his meals and lodging as traveling expenses, even while working on strictly temporary and widely separated jobs, unless he can show that he has a `home' in another location and is therefore `away from home' while so employed. Charles E. Duncan v. Commissioner , 17 B.T.A. 1088, affirmed per curiam , 47 Fed.(2d) 1082 (traveling salesman); Moses Mitnick v. Commissioner , 13 T.C. 1 (manager of theatrical show on tour;) Wilson John Fisher v. Commissioner , 23 T.C. 218, affirmed 230 Fed.(2d) 79 (musician performing as soloist in various hotel dining rooms).

The `home' of a construction worker is ordinarily at his principal or regular post of duty, which is usually the city or general area in which he customarily or most frequently works. If a construction worker has such a city or general area where he usually works and works only temporarily at any other location away from his regular post of duty, the place where he usually works must be recognized as his `home' for traveling expense purposes. Hoarry F. Schurer v. Commissioner , 3 T.C. 544, acquiescence, C.B. 1944, 24.

Following the Commissioner's acquiescence in the Schurer case, it has been the position of the Internal Revenue Service that a construction worker, like any other taxpayer similarly situated, incurs deductible traveling expenses `while away from home' if he is able to show (1) that he has a `home' for such purposes and (2) that his employment at a different location is only temporary and not of substantial duration. Cases such as E. G. Leach v. Commissioner , 12 T.C. 20, acquiescence, C.B. 1949-1, 3, have at times been thought to adopt instead an approach that allows taxpayers (especially construction workers) to deduct their expenses for meals and loding while temporarily employed at various locations simply on a showing that they were not regularly employed at such locations, and without any showing that during such periods they actually had a `home' elsewhere. In the light of all the facts of the case, however, the Service does not understand the succinctly stated findings and opinion of the court as sanctioning any such short-cut approach, and, in any event, the Commissioner's acquiescence is not to be so understood.

To turn now to Case (1) above, it is clear that the taxpayer's `home' for traveling expense purposes is at the city in and around which he usually workds. On the stated facts it seems likely also that the taxpayer's employments at other locations are temporary and that the case falls within the ambit of the Commissioner's acquiescence in the Schurer decision. A taxpayer who is only temporarily employed at a particular business location may be `away from home,' provided he can show that his `home' is elsewhere.

The same would not be true if the taxpayer's employment at such a distant point were for more than a temporary period. Decisions of the Tax Court have repeatedly held that application of the rule in the Coburn and Schurer cases is limited to those employments which are `temporary,' as distinguished from those which are indefinite, indeterminate, or otherwise more permanent in nature. Kermit L. Claunch v. Commissioner , 29 T.C. 1047, affirmed 264 Fed.(2d) 309; Hunry C. Warren v. Commissioner , 13 T.C. 205; John D. Johnson v. Commissioner , 8 T.C. 303. Employment is temporary for this purpose only if its termination can be foreseen within a reasonably short period of time. Beatrice H. Albert v. Commissioner , 13 T.C. 129. Moreover, employment which is originally temporary in this sense may become employment of indeterminate duration where it extends beyond the reasonably short period expected. Arnold P. Bark v. Commissioner , 6 T.C. 851.

The expectation of the taxpayer as to the likely duration of an employment or stay at a particular place frequently presents a trouble-some question of fact. This largely (but not wholly) subjective test is, nevertheless, an indispensable factor in the rule for differentiating between the temporary and the more permanent employment or stay. The single fact that an employment or stay at a particular place is actually of relatively short duration is not in itself a sufficient basis for considering the employment or stay to be temporary, as will be evident from a simple illustration. If a taxpayer is transferred from City A to City B on a permanent assignment, the expenses of his meals and lodging after arrival in City B are nondeductible personal or living expenses. They cannot be converted into deductible traveling expenses simply because the assignment is soon terminated, even though the termination is for business rather than for personal reasons. Any other result would be palpably contrary to the intent of section 162 of the Code, when read in the light of the prohibition in section 262 of the Code of any deduction for personal or living expenses.

Although neither the Service nor the courts have attempted to prescribe any specific length of time as representing the usual line of demarcation between temporary and nontemporary periods for traveling expense purpose, an employment or stay of anticipated or actual duration of a year or more at a particular location must be viewed by the Service as strongly tending to indicate presence there beyond a temporary period, and cases involving such an employment or stay will normally for that reason alone be subjected to close scrutiny. Cases involving anticipated or actual periods of almost a full year may, as a factual matter, be open to question in nearly the same degree, especially since there might be little real difference between a taxpayer's expectations in such a case and one in which his employment or stay at a particular location is expected to continue for a year or more. Nevertheless, in the interest of practical and fair administration, in cases involving substantially the same facts as Case (1) the Service will normally raise no question concerning the temporary nature of an employment or stay at a particular location if both its anticipated and actual durations are for less than one year, unless the facts concerning the frequency of employments away from the city where business contacts are maintained disclose a pattern suggesting that the taxpayer may have sought without real business justification to take advantage of an assumed lenience on the part of the Service concerning tax avoidance abuses in this area.

It will be noted that the facts of Case (1) do not mention the expected or actual duration of the construction project itself. How long a project as a whole may be expected to last, unless it is for a short time, is usually of no particular significance. The probable duration of the particular phase of the project on which the taxpayer expects to be engaged is an evidentiary fact to be weighed, but even that fact is not necessarily determinative. For example, if it were a known fact that the welding work on a large construction project could be expected to last over two years, it would not necessarily follow that every welder who works on the project expects to remain working there that long. One who actually works on that phase of the project for less than a year could still prove by evidence as to the probable availability of work that he reasonably expected to obtain employment in or near his home area in less than a year, particularly if coupled with evidence of continuing efforts to obtain such employment.

Subject to the qualifications stated in the two preceding paragraphs, Case (1) above is deemed to involve only temporary employments away from the taxpayer's `home.' Traveling expenses directly attributable to such employments are therefore deductible under section 162 of the Code if such expenses may be treated as incurred `in pursuit of business,' the question presented by the third condition laid down in the Flowers decision.

In Flowers a lawyer who had long lived and practiced law in Jackson, Mississippi, was employed as the principal counsel of a railroad with its main office in Mobile, Alabama, on the understanding that he could continue to reside in Jackson but would pay his own traveling expenses between Jackson and Mobile and his living expenses at both places. The railroad for many years permitted the taxpayer to do his work at either Jackson or Mobile but provided him with an office only at Mobile, which the Court regarded as his principal post of business. Although it was clearly the result of his own choice that he did not perform nearly all of his work in Mobile, the taxpayer sought to deduct the cost of transportation for 73 trips from Jackson to Mobile and for meals and lodging while in Mobile during the years in suit. Affirming the Tax Court's decision, the Supreme Court held for the Commissioner on the ground that the expenses in issue were not incurred `in pursuit of business' because the travel was required not by the railroad's business but solely by reason of the taxpayer's personal desire to maintain his residence in Jackson while his principal post of duty was in Mobile. As the Court observed, `Business trips are to be identified in relation to business demands and the traveler's business headquarters. The exigencies of business rather than the personal conveniences and necessities of the traveler must be the motivating factors.' 326 U.S. 465, at 474.

Although the Court's opinion had stated earlier that there must be `a direct connection between the expenditure and the carrying on of the trade or business of the taxpayer or of his employer,' the latter portion of the opinion dwelt at some length on the question whether the business of the employer had been served by the travel in controversy. A petition for rehearing contended for the taxpayer that the Court should instead have considered whether such expenses were incurred in pursuit of the business of the taxpayer as an employee of the railroad, as required by the language of section 23(a)(1)(A) of the Internal Revenue Code of 1939, but, it was unavailing, being denied by summary order. 326 U.S. 812. Some judicial opinions have suggested that the Flowers decision thus stands for a general rule that an employee's traveling expenses are deductible only if required by the exigencies of the employer's business. See, for example, Commissioner v. James E. Peurifoy, et al. , 254 Fed.(2d) 483, affirmed per curiam , 358 U.S. 59, Ct. D. 1832, C.B. 1958-2, 916; Commissioner v. Peter F. Janss , 260 Fed.(2d) 99.

The Service, however, does not view either the Flowers decision or the Supreme Court's per curiam affirmance of the Peurifoy decision as standing for any such general rule which is applicable to all kinds of employees. While denial of the petition for rehearing in Flowers shows that the Court was not persuaded to change its decision, such action should not be taken to indicate that the Court disregarded the language of the statute and viewed the taxpayer as having had no trade or business of his own. That the expenses were incurred solely as a result of the taxpayer's personal desire to maintain his residence at a point distant from his principal post of duty equally supported a holding that the expenses were nondeductible personal expenses even though considered in relationship to the taxpayer's own trade or business as an employee of the railroad. Nor does the Supreme Court's decision in Peurifoy require a contrary conclusion since the Court in that case did not reach any substantive question on the merits, holding only that the United States Court of Appeals had fairly assessed the record on the sole question presented by the parties, as to whether the employments there involved were temporary under the rule of the Schurer and Leach decisions, supra .

In any event, the Service has long held that an employee may have a trade or business, as such. See I.T. 4012, C.B. 1950-1, 33; Rev. Rul. 190, C.B. 1953-2, 303, at 305; and sections 1.612-2(d) and 1.162-5(a) and (d) of the Income Tax Regulations. The expenses involved in Case (1) may hence be treated as incurred `in pursuit of business' if it can be said that they are incurred in pursuit of the trade or business of the construction worker himself.

The expenses involved in Case (1) are incurred in pursuit of the construction worker's own trade or business unless it could be concluded that a construction worker who is unemployed has no trade or business for that reason alone. If such a theory were tenable, the expenses of transportation to a distant point to take a job at a construction project might fall within the rule that expenses in seeking employment or in placing oneself in a position to begin rendering personal services for compensation are nondeductible personal expenses. See, for example, paragraphs (e) and (f) of section 1.212-1 of the Income Tax Regulations; Michale F. McDonald v. Commissioner , 323 U.S. 57, Ct. D. 1617, C.B. 1944, 94; United States v. Sherrill O. Woodall , 255 Fed.(2d) 370, certiorari denied, 358 U.S. 824. It is the view of the Service, however, that Case (1) does not lend itself to such an analysis.

It would be most unrealistic, regardless of the proper treatment in other cases, to treat a wage earner whose livelihood is regularly gained from a series of relatively short employment for various employers as having no trade or business during intervals between such employments. Such treatment would mean, for example, that a carpenter who works on a succession of short-term jobs could not deduct as a business expense the cost of having his tools sharpened simply because he has the work done between jobs. The business of such an individual, though it involves employment relationships from a strictly legal point of view, is too closely akin to that of the self-employed individual, whose livelihood likewise is based on a succession of shortterm jobs, to allow such treatment to be countenanced in the practical realm of income taxation. No one would say that a scissors grinder has no trade or business except while actually working for a housewife or that a doctor has none while not actually attending a patient. The Service, therefore, will continue to treat a wage earner whose livelihood consists of a series of relatively short employments for various employers as having a trade or business of his own, providing, of course, that the facts in the particular case show a real and substantial business justification for engaging in the several employments, such as the necessities of a regular trade.

The construction worker dealt with in Case (1) is essentially a tradesman whose trade regularly requiries him to seek intermittent employments from time to time. It is in part for that very reason that many workers in the building trades become members of labor unions in order to obtain sufficient employment, and it has long been held that initiation fees and dues paid to obtain and maintain union membership are deductible even though the purpose of the taxpayer in incurring such expenses is to obtain employment. I.T. 3634, C.B. 1944, 90; O.D. 450 C.B. 2, 105 (1920).

For the foregoing reasons it is concluded that the traveling expenses involved in Case (1) are incurred `in pursuit of business' for purposes of the Flowers rule and are hence deductible under section 162 of the Code as traveling expenses while away from home, subject only to the qualifications noted immediately prior to the foregoing discussion of the third condition laid down in the Flowers decision. To the extent that the expenses are so deductible under section 162, they are deductible under section in computing adjusted gross income.

Case (2) presents primarily the question whether a construction worker who does not regularly work in a locality may, nevertheless, have a `home' there so as to be able to deduct his traveling expenses incident to employment elsewhere. Since the worker in Case (2) maintains his regular place of abode in or near the locality where his employment contacts are maintained, it may seem an inverted approach to the problem to suppose that his `home' for traveling expense purposes could be elsewhere. It should be apparent from the foregoing discussion, however, that the problem is not that simple; if a construction worker regularly lives and makes his employment contacts in City A but regularly works in City B , for example, his `home' in the present context is in City B , not City A .

It would equally represent an oversimplification of the problem to conclude that a construction worker may never have a `home' for traveling expense purposes in a locality where he does not regularly work. As has been indicated, practical considerations, and the interplay of the business and personal expense concepts of sections 162 and 262 of the Code, have of necessity forced the term `home' in section 162(a) to take on a somewhat unfamiliar meaning in those relatively unusual situations, exemplified by many decided cases, where the taxpayer's regular place of work does not coincide with his home in the more familiar sense of residence. It would be quite another matter, and would wrench the meaning of the word `home' beyond the permissible bounds of statutory construction, to read it as totally devoid of any commonly understood meaning and as comprehending no more and no less than one's principal or regular place of business or employment.

That such is true is well illustrated, at least indirectly, in the case of the itinerant construction worker, or `boomer.' In part it is precisely because he takes his family (if any) and his personal belongings with him from one construction project to another, and because he has no actual residence elsewhere, that he is regarded as having his `home' for traveling expense purposes only at each successive place where he works. Compare the Duncan, Mitnick , and Fisher decisions. Where one's usual place of abode and regular place of work coincide, as they do in most cases in the section 162(a) area, there is no real problem; it is only where the two are separated that a determination as to which is `home' for traveling expense purposes becomes necessary.

From a slightly different point of view, Case (2) may be said to suggest the question where to draw the line between the itinerant and the nonitinerant construction worker in cases where the facts are less clear as to the existence of a particular area in which the taxpayer both maintains his regular place of abode and makes his employment contacts. The question is not an easy one and does not lend itself to the laying down of any predetermined line. Nevertheless, it is possible to indicate some of the pertinent considerations. They will be seen to bear more or less equally on the `itinerant v. nonitinerant' question, on where the taxpayers' `home' should be found to be, and on whether travel away from the point where his business contacts are maintained is `in pursuit of business.' All of these are essentially questions of fact to be resolved in the light of all the evidentiary facts of the particular case.

Important considerations in resolving all of those questions, in the view of the Service, are whether a claimed place of abode is the taxpayer's regular place of abode in a real and substantial sense and whether the facts as a whole tend to show that the undertaking of jobs away from the point where business contacts are normally maintained is primarily for business rather than for personal reasons. For example, in the absence of clear evidence to the contrary, it is normally to be presumed from common experience that a man with a wife and children would prefer to work regularly in or near the locality where his family resides so that he may be with them during off-duty hours. That a worker has a family with a fixed residence should therefore tend to show that he takes jobs at distant points for business rather than for personal reasons. Should his case present the additional fact that there is a shortage of work in the locality where the family resides, or a shortgage of sufficient work there to provide year-round employment, there would be even stronger reasons to conclude that the jobs are taken elsewhere for business rather than for personal reasons. In the absence of persuasive evidence to show otherwise, it would be reasonable to conclude on such facts that the taxpayer is not an itinerant worker but has a `home' for taveling expense purposes in the locality where he normally lives with his family and makes his employment contacts, and also that his employments elsewhere are `in pursuit of business' under the third condition of the Flowers rule.

It is not meant by this example to indicate that a construction worker must be married in order to be recognized as having a `home' where he maintains his place of abode and makes his employment contacts, any more than it is meant in either Case (1) or Case (2) to suggest that he must be a member of a labor union before he may be treated as regularly marking his employment contacts in a particular locality, sometimes for convenience called a `business headquarters.' See Rev. Rul. 54-497, C.B. 1954-2, 75, at 78. It is enough for either purpose that there be a preponderance of evidence that the taxpayer has a relatively fixed residence and a `business headquarters' in or near the same locality, and that he works temporarily away from that locality for reasons that are bona fide business reasons, rather than for reasons that are primarily personal in nature.

It remains probable, of course, that a bachelor would normally have greater difficulty than a married man in establishing by preponderant evidence that he has both a regular place of abode and a business headquarters in a particular locality and that his temporary employments elsewhere are undertaken primarily for bona fide business reasons. For example, a bachelor may be motivated primarily by a desire to see the country, or the world, before he settles down, or he may more easily be influenced by other personal considerations such as companionship with other workers. Neither a bachelor nor a married man, however, will be allowed by the Service to deduct his expenses for travel, meals, and lodging as business expenses because of any purported connection with a particular locality where the connection is more nominal than real and he appears predominantly to be an itinerant worker, or `boomer.'

The facts of Case (2) satisfy the tests stated above since the taxpayer clearly has a business headquarters at the city in or near which he maintains his regular place of abode and makes his employment contacts and since he obtains relatively short jobs elsewhere for business rather than for personal reasons. Subject to the same qualifications as are stated above with reference to Case (1), therefore, the taxpayer's traveling expenses are deductible under section 162 of the Code and hence deductible in computing adjusted gross income under section 62 of the Code. It should be noted, however, that in the determination of tax liabilities in concrete cases those claimed to be of the Case (2) type will present varied, and often difficult, questions of fact that can be resolved only in the light of all the facts and circumstances of the particular case.