Travel Deduction Gets Bumped

The Tax Court recently held that an airline mechanic could not deduct travel expenses while working in a city to which he was transferred by his employer, even though he hoped to return to his city of residence. The court concluded the mechanic was not “away from home” as required by IRC § 162(a)(2).

Travel expenses are deductible when taxpayers duplicate their living expenses because they are temporarily away from home because of their trade or business. For this purpose, “home” is the taxpayer’s principal place of employment, not his or her personal residence. Travel expenses related to out-of-town work assignments of an indefinite period—those exceeding a year—are nondeductible. Out-of-town work assignments of a year or less can be classified as either temporary (deductible) or indefinite (nondeductible), as determined by the facts of each situation.

Stanley Wasik was an airline mechanic for Northwest Airlines in Minneapolis. He and other Northwest mechanics were allowed to accept a layoff or take the position of a mechanic with less seniority in another city, “bumping” the other mechanic. Wasik chose to bump a mechanic in Milwaukee, hoping that union negotiations and his seniority would restore his job in Minneapolis. His family stayed in Minnesota while he worked and rented an apartment in Milwaukee. The IRS examined his 2003 tax return and disallowed his travel deduction for lodging and meals while in Milwaukee.

The Tax Court concluded that once Wasik was laid off in Minneapolis he had no job there, and there was no business purpose for him to maintain a home in that area. The maintenance of his home in Minneapolis was strictly for personal reasons, despite his belief that he might again have a job there. The court stated that his stay in Milwaukee was indefinite because there was no way for him to know whether his job in Minneapolis would ever be restored. This case was one of many recently decided by the Tax Court involving mechanics of Northwest Airlines with similar facts and the same result.

Stanley A. and Connie A. Wasik v. Commissioner , TC Memo 2007-148.

Prepared by Charles J. Reichert , CPA, professor of accounting, University of Wisconsin, Superior.