Rev. Rul. 63-239

The Internal Revenue Service will not follow the decision of the United States Court of Appeals for the Eighth Circuit in Allan L. Hanson et ux. v. Commissioner, 298 Fed. (2d) 391 (1962), which reversed the decision of the Tax Court of the United States, 35 T.C. 413 (1960).

In that case a contractor supervised construction work at various job sites, most of which ranged from 6 to 80 miles from the town where he maintained his residence as well as his office, shop and equipment. On many of his trips, the taxpayer was able to return home on the same day, occasionally late at night. The question involved was whether the cost of meals was a deductible expense under sections 62 and 162(a)(2) of the Internal Revenue Code of 1954 when it was incurred on trips during which the taxpayer was not away from home overnight.

The position of the Service is that before a taxpayer can deduct the cost of his meals and lodging as "away from home" expenses, his absence on business from his principal or regular post of duty must be "overnight." Such absence need not be for an entire 24-hour day or throughout the hours from dusk until dawn, but it must be of such duration or nature that the taxpayer cannot leave from and return to that location at the start and finish of, or before and after, each day's work; or at least that he cannot reasonably be expected to do so without being released from duty for sufficient time to obtain substantial sleep or rest elsewhere. This position has been consistently applied by the Service for many years. Revenue Ruling 54-497, C.B. 1954-2, 75, at 78-79. It has also been upheld in a number of decisions of the Tax Court of the United States (Al J. Smith et ux. v. Commissioner, 33 T.C. 861 (1960); Sam J. Herrin et ux. v. Commissioner, 28 T.C. 1303 (1957); Fred Marion Osteen et ux. v. Commissioner, 14 T.C. 1261 (1950)), and is substantially in accord with the rule which the Court of Appeals for the Fifth Circuit stated in the last paragraph of its opinion in F. M. Williams v. George D. Patterson, 286 Fed. (2d) 333 (1961). See Revenue Ruling 61-221, C.B. 1961-2, 34.

The reviewing court in the Hanson case, which made no distinction among the various trips there involved, rejected the "overnight" rule for determining whether a taxpayer was "away from home" as having no basis in the statute.

It is the view of the Service that the decision fails to give adequate consideration to the purpose and intent of Congress as revealed in the House and Senate Committee Reports on section 62(2)(C) of the 1954 Code. (House Report 1337, Eighty-third Congress, 9 and A19; Senate Report 1622, Eighty-third Congress, 9 and 169.) Both Committee Reports clearly indicate that Congress regarded prior section 22(n)(2) of the Internal Revenue Code of 1939 as not allowing an employee in computing adjusted gross income to deduct even business transportation expenses as expenses of travel while away from home unless such transportation expenses were incurred while he was "away from home overnight." Desiring to eliminate this problem and to treat employees in this respect like self-employed persons, Congress changed the prior law, not by rejecting the "overnight" rule, but by allowing employees in computing adjusted gross income a new deduction for nonreimbursed business transportation expenses.

It is apparent from the legislative history that Congress adopted that amendment with clear recognition of the "overnight" rule. Of equal or greater significance are the plain statements in the Committee Reports that the new deduction is restricted to business transportation expenses incurred when not away from home in travel status and that business transportation expenses do not include the cost of meals and lodging. Hence there are ample grounds for concluding that Congress intended to retain the "overnight" rule with respect to expenses incurred for meals on nonovernight trips, as to which the Service had consistently prevailed in litigation under both section 22(n)(2) and section 23(a)(1)(A) of the 1939 Code. Compare Commissioner v. Sally L. Bilder, 369 U.S. 499 (1962), Ct. D. 1871, C.B. 1962-1, 38.

Although certiorari was not applied for in the Hanson case, the decision will not be followed by the Service as a precedent in the disposition of similar cases involving meals.

¹ Based on Technical Information Release 512, dated October 2, 1963.