Rev. Rul. 80-348

FACTS AND HOLDING

The Internal Revenue Service has reconsidered Rev. Rul. 78-209, 1978-1 C.B. 25, which holds that reimbursements received by elected representatives' of union locals from their international union for expenses of traveling away from home incurred in attending the union's annual convention and for lost salary in connection therewith are includible in the delegates' gross incomes under section 61 of the Internal Revenue Code, but are not "wages" subject to withholding under sections 3121(a), 3306(b), and 3401(a).

The question has also been raised as to the application of section 162(a)(2) of the Code, particularly in circumstances where the local union representative incurred the travel expenses in one taxable year and received reimbursement from the international union in the following taxable year.

Ordinarily, travel expenses incurred while away from home in carrying on any trade or business are deductible under section 162(a)(2). However, taxpayers are not allowed deductions under section 162(a) for expenditures for which they have a right or expectation of reimbursement. Burnett v. Commissioner, 356 F.2d 755 (5th Cir. 1966); Canelo v. Commissioner, 53 T.C. 217, 225 (1969), aff'd, 447 F.2d 484 (9th Cir. 1971); Rev. Rul. 79-263, 1979-2 C.B. 82.

Travel expenditures incurred at the close of one taxable period, even though they would otherwise be allowable under section 162(a)(2) of the Code, may not be deducted because of the expectation of reimbursement. Also, the reimbursement that is received in the following taxable period would not be includible in income. See Rev. Rul. 79-263; see also Rev. Rul. 79-142, 1979-1 C.B. 58, concerning exclusion from taxpayer's gross income of certain reimbursements.

Accordingly, the reimbursements in question are not includible in gross income, and no deductions are allowable for the reimbursed expenses under section 162 of the Code even if reimbursement does not occur until a later year. Reimbursements for lost salary are, however, includible in gross income in the year received, but are not "wages" for employment tax purposes.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 78-209 is modified to the extent it holds that the reimbursement of expenses of traveling away from home incurred by a union representative is includible in the representative's gross income and, as modified, superseded.