A long-haul truck driver who spent most of the time on the road and had no other home did not have a tax home that would allow him to deduct his unreimbursed travel expenses because he was not away from home, the Tax Court held (Howard, T.C. Memo. 2015-38).
The truck driver, who resided in Missouri, spent 358 days in 2009 on the road. His employer, a Nebraska trucking company, did not require him to return to its base, but sent assignments to the trucker at the end point of his last trucking assignment.
He used his mother’s address as his home address to qualify for his truck driver’s license, but he did not stay at her house when he was in town, except for a few days when he served on jury duty. The rest of the time, he slept in his truck, did not pay rent or any of his mother’s housing expenses, and kept his belongings in a storage facility.
The taxpayer claimed a $27,108 deduction for unreimbursed employee business expenses on his 2009 tax return. Included in these expenses were $19,109 for travel expenses while away from home, including per diem expenses while on the road, hotel expenses, and other minor expenses, as well as $7,334 for truck stop electrification (TSE) expenses. (TSE provides electricity to truckers at truck stops to power the truck’s air conditioner, heater, lights, and appliances, so they do not have to sit with their engines idling.) The IRS disallowed all of these deductions.
The taxpayer contended that the per diem expenses and hotel expenses were deductible because they were incurred while he was traveling away from his home (his mother’s house) for business purposes. The IRS disallowed the deductions because it found that he did not have a tax home and thus the expenses were not incurred while traveling away from home. The Tax Court agreed with the IRS, finding that for a home to qualify as a tax home, a taxpayer is required to incur expenses to maintain the home while on the road, which the taxpayer did not do.
But the court also held that the TSE expenses were deductible as ordinary and necessary trade or business expenses because they were analogous to fuel expenses and were not, as the IRS contended, equivalent to hotel expenses. Because Transportation Department regulations require truckers to rest 10 hours for every 14 hours they drive, they must power their trucks for those 10 hours for business reasons. Truckers can either idle their truck engines using diesel fuel or power them by connecting to TSE at truck stops, so the IRS saw no distinction between diesel fuel and TSE expenses. The TSE expenses were deductible as unreimbursed business expenses subject to the 2% floor on itemized deductions.
The court also held that the taxpayer was liable for the Sec. 6662(a) accuracy-related penalty. The court found that he was not negligent, because he read IRS publications to determine how to treat his expenses and acted in good faith. Therefore, he was not subject to the penalty under Sec. 6662(b)(1) for negligence or disregard of rules or regulations. However, the court held he was subject to the penalty under Sec. 6662(b)(2) to the extent his underpayment of tax for 2009 was attributable to a substantial understatement of income tax.
—Sally P. Schreiber is a JofA senior editor.