Revenue Ruling 93-86 "What is Temporary Employment or Job Site?"

Status: Amplified by 99-7

26 CFR 1.162-2. Traveling expenses.

(Also Section 262; 1.262-1.)

Away from home temporarily. Guidelines are provided for determining

whether taxpayers are away from home temporarily for purposes of deducting

travel expenses under section 162(a)(2) of the Code as amended by the

Energy Policy Act of 1992. Rev. Rul. 83-82 obsoleted in part and Notice

93-29 amplified.

REV. RUL. 93-86

ISSUE

What effect does the 1-year limitation on temporary travel, as added by

section 1938 of the Energy Policy Act of 1992, Pub. L. No. 102-486, have

on the deductibility of away from home travel expenses under section

162(a)(2) of the Internal Revenue Code?

FACTS

Situation 1. Taxpayer A is regularly employed in city CI-1. In 1993, A

accepted work in city CI-2, which is 250 miles from CI-1. A realistically

expected the work in CI-2 to be completed in 6 months and planned to

return to CI-1 at that time. In fact, the employment lasted 10 months,

after which time A returned to CI-1.

Situation 2. The facts are the same as in Situation 1, except that

Taxpayer B realistically expected the work in CI-2 to be completed in 18

months, but in fact it was completed in 10 months.

Situation 3. The facts are the same as in Situation 1, except that

Taxpayer C realistically expected the work in CI-2 to be completed in 9

months. After 8 months, however, C was asked to remain for 7 more months

(for a total actual stay of 15 months).

LAW AND ANALYSIS

Section 162(a)(2) of the Code allows a deduction for all the ordinary

and necessary expenses paid or incurred during the taxable year in

carrying on a trade or business, including travel expenses (including

amounts expended for meals and lodging other than amounts that are lavish

or extravagant under the circumstances) while away from home in the

pursuit of a trade or business. Under section 262(a), no deduction is

allowed for personal, living, or family expenses, unless expressly

provided by law.

For travel expenses to be deductible under section 162(a)(2) of the

Code, they must satisfy the following three conditions: (1) they must be

ordinary and necessary, (2) they must be incurred while away from home,

and (3) they must be incurred in pursuit of a trade or business. See

Commissioner v. Flowers, 326 U.S. 465 (1946), 1946-1 C.B. 57, and Rev.

Rul. 60-189, 1960-1 C.B. 60.

A taxpayer's "home" for purposes of section 162(a)(2) of the Code is

generally considered to be located at (1) the taxpayer's regular or

principal (if more than one regular) place of business, or (2) if the

taxpayer has no regular or principal place of business, then at the

taxpayer's regular place of abode in a real and substantial sense. If a

taxpayer comes within neither category (1) nor category (2), the taxpayer

is considered to be an itinerant whose "home" is wherever the taxpayer

happens to work. Rev. Rul. 73-529, 1973-2 C.B. 37, and Rev. Rul. 60-189.

Travel expenses paid or incurred in connection with an indefinite or

permanent work assignment are generally nondeductible.

Code. See Peurifoy v. Commissioner, 358 U.S. 59 (1958), 1958-2 C.B. 916.

The courts and the Service have held that employment is temporary for this

purpose only if its termination can be foreseen within a reasonably short

period of time. See Albert v. Commissioner, 13 T.C. 129 (1949), and Rev.

Rul. 75-432, 1975-2 C.B. 60.

Employment that is initially temporary may become indefinite due to

changed circumstances. See Norwood v. Commissioner, 66 T.C. 467 (1976),

Bark v. Commissioner, 6 T.C. 851 (1946), Rev. Rul. 73-578, 1973-2 C.B. 39,

and Rev. Rul. 60-189. In Rev. Rul. 73-578, a citizen of a foreign country

comes to the U.S. under a 6-month nonimmigrant visa to work for a U.S.

employer, intending to resume regular employment in the foreign country

after this period. After 4 months, however, the individual agrees to

continue the employment for an additional 14 months. Rev. Rul. 73-578

holds that the individual may deduct ordinary and necessary travel

expenses paid or incurred during the first 4 months of the employment.

However, the individual may not deduct travel expenses paid or incurred

thereafter, unless the expenses are paid or incurred in connection with

temporary employment away from the location of the individual's regular

employment with the U.S. employer.

Revenue Ruling 83-82, 1983-1 C.B. 45, provides that, for purposes of

the deduction for travel expenses under section 162(a)(2) of the Code, if

the taxpayer anticipates employment away from home to last less than 1

year, then all the facts and circumstances are considered to determine

whether such employment is temporary. If the taxpayer anticipates

employment to last (and it does in fact last) between 1 and 2 years, Rev.

Rul. 83-82 provides a rebuttable presumption that the employment is

indefinite. The taxpayer may rebut the presumption by demonstrating

certain objective factors set forth in the revenue ruling. For employment

with an anticipated or actual stay of 2 years or more, Rev. Rul. 83-82

holds that such employment is indefinite, regardless of any other facts or

circumstances. All the factual situations in Rev. Rul. 83-82 involve

employment in a single location for more than 1 year.

Section 1938 of the Energy Policy Act of 1992, Pub. L. No. 102-486,

amended section 162(a)(2) of the Code to provide that a taxpayer shall not

be treated as being temporarily away from home during any period of

employment if such period exceeds 1 year. This amendment applies to any

period of employment in a single location if such period exceeds 1 year

See H.R. Conf. Rep. No. 102-1018, 102d Cong., 2d Sess. 429, 430 (1992).

Thus, section 162(a)(2), as amended, eliminates the rebuttable presumption

category under Rev. Rul. 83-82 for employment lasting between 1 and 2

years, and shortens the 2-year limit under that ruling to 1 year. The

amendment is effective for costs paid or incurred after December 31, 1992.

Accordingly, if employment away from home in a single location is

realistically expected to last (and does in fact last) for 1 year or less,

the employment will be treated as temporary in the absence of facts and

circumstances indicating otherwise. If employment away from home in a

single location is realistically expected to last for more than 1 year or

there is no realistic expectation that the employment will last for 1 year

or less, the employment will be treated as indefinite, regardless of

whether it actually exceeds 1 year. If employment away from home in a

single location initially is realistically expected to last for 1 year or

less, but at some later date the employment is realistically expected to

exceed 1 year, that employment will be treated as temporary (in the

absence of facts and circumstances indicating otherwise) until the date

that the taxpayer's realistic expectation changes.

In Situation 1, A realistically expected that the work in CI-2 would

last only 6 months, and it did in fact last less than 1 year. Because A

had always intended to return to CI-1 at the end of A's employment in

CI-2, the CI-2 employment is temporary. Thus, A's travel expenses paid or

incurred in CI-2 are deductible.

In Situation 2, B's employment in CI-2 is indefinite because B

realistically expected that the work in CI-2 would last longer than 1

year, even though it actually lasted less than 1 year. Thus, B's travel

expenses paid or incurred in CI-2 are nondeductible.

In Situation 3, C at first realistically expected that the work in CI-2

would last only 9 months. However, due to changed circumstances occurring

after 8 months, it was no longer realistic for C to expect that the

employment in CI-2 would last for 1 year or less. Therefore, C's

employment in CI-2 is temporary for 8 months, and indefinite for the

remaining 7 months. Thus, C's travel expenses paid or incurred in CI-2

during the first 8 months are deductible, but C's travel expenses paid or

incurred thereafter are nondeductible.

HOLDING

Under section 162(a)(2) of the Code as amended by the Energy Policy Act

of 1992, if employment away from home in a single location is

realistically expected to last (and does in fact last for 1 year or less,

the employment is temporary in the absence of facts and circumstances

indicating otherwise. If employment away from home in a single location is

realistically expected to last for more than 1 year or there is no

realistic expectation that the employment will last for 1 year or less,

the employment is indefinite, regardless of whether it actually exceeds 1

year. If employment away from home in a single location initially is

realistically expected to last for 1 year or less, but at some later date

the employment is realistically expected to exceed 1 year, that employment

will be treated as temporary (in the absence of facts and circumstances

indicating otherwise) until the date that the taxpayer's realistic

expectation changes.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 83-82 is obsoleted for costs paid or incurred after December

31, 1992, because all the factual situations in that ruling involve

employment in a single location for more than 1 year. Notice 93-29,

1993-18 I.R.B. 14 (May 3, 1993), is amplified.

EFFECTIVE DATE

This revenue ruling is effective for costs paid or incurred after

December 31, 1992.

DRAFTING INFORMATION

The principal author of this revenue ruling is David A. Schneider of

the Office of Assistant Chief Counsel (Income Tax and Accounting). For

further information regarding this revenue ruling, contact Mr. Schneider

on (202) 622-1585 (not a toll-free call).