Magazine article The CPA Journal

IRS Will Not Follow Tax Court Ruling on Deductibility of Transportation Expenses

Magazine article The CPA Journal

IRS Will Not Follow Tax Court Ruling on Deductibility of Transportation Expenses

Article excerpt

In Rev. Rul. 94-47, the IRS announced that it will not follow the Tax Court's decision in Walker v. Commissioner, 101 T.C 537 (1883), which interpreted Rev. Rul. 90-23. In Walker, the court ruled that a taxpayer whose only regular place of business is located at his or her residence can deduct transportation expenses between the residence and temporary work locations. The IRS is appealing Walker.

In 1990, the IRS issued Rev. Rul. 90-23, which allows a taxpayer to deduct transportation expenses between the taxpayer's residence and temporary work locations, regardless of the distance, if the taxpayer has one or more regular places of business. Also, if the taxpayer is an employee, any reimbursement is neither includable in the employee's gross income nor subject to employment taxes. A "regular place of business" is "any location at which the taxpayer works or performs services on a regular basis," whether or not on a set schedule. Rev. Rul. 90-23 does not require that it be located away from the taxpayer's residence. A "temporary place of business" is one at which the taxpayer performs services on an irregular or short-term basis (i.e., generally a matter of days or weeks)." Not mentioned in Rev. Rul. 90-23 is IRC Sec. 280A's "principal place of business," which, according to the U.S. Supreme Court in Commissioner v. Soliman, 113 S. Ct. 701 (1993), is typically the location where services are rendered.

Walker, a tree cutter who worked at various sites in a large forest cut trees for approximately two to three weeks at each site. Also, Walker worked at his residence about seven hours per week where he arranged future jobs and maintained, repaired, and stored his cutting tools. The Tax Court ruled that Walker's residence was not his principal place of business, but it was his regular place of business under Rev. Rul. 90-23. Therefore, transportation expenses between his residence and his temporary job sites in the forest were deductible.

m Rev. Rul. 94-47, the IRS disagreed with the Tax Court's interpretation in Walker that Rev. Rul. 90-23 applies where the taxpayer's only regular place of business is located at his or her residence. While the IRS did not dispute that Walker's residence qualified as a regular place of business, the IRS held in Rev. Rul. 94-47 that transportation expenses between one's residence and a work location are nondeductible commuting expenses unless one of the following situations apply:

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