In Jacobs v. Commissioner, T.C. Summary Opinion 2015-3, the U.S. Tax Court concluded that an over-the-road truck driver was not entitled to deduct travel expenses for traveling away from home since he lived in his truck.
Facts & Procedural History
Mr. Jacobs is a truck driver.
He operated his own truck prior to 2006, worked for a “travel-trailer delivery” service (Megatrux Transportation) in 2007, worked for a trucking “expedite” service in 2008, and reverted to long haul trucking in 2009.
Mr. Jacobs did not report the sale of his truck in 2007, $7,000 of income from Megatrux Transportation, or $45,000 of the $180,000 he received in 2009 for long haul trucking.
Mr. Jacobs considered his home to be in Cottage Grove, Minnesota, where he stayed in the guest room of his longtime friend.
The IRS adjusted Mr. Jacobs income, but did not allow certain expenses.
Mr. Jacobs petitioned the tax court to redetermine his tax liability.
The main question before the court was whether Mr. Jacobs could deduct any per diem meal expenses for 2009. More specifically, the question is whether Mr. Jacobs was away from his tax home.
What Are Some Acceptable & Unacceptable Deductions ?
Generally, taxpayers can deduct reasonable and necessary travel expenses incurred while away from home in the pursuit of a trade or business, but cannot deduct personal, living, or family expenses. A “home” in tax law is usually where a taxpayer has his principal place of employment. Tax law defines a home as the permanent residence at which a taxpayer incurs substantial continuing living expenses only if he doesn’t have a principal place of employment.
The court cited prior cases, noting that “a taxpayer who’s constantly in motion is a “tax turtle”–that is, someone with no fixed residence who carries his “home” with him.” Such a taxpayer is not entitled to business deductions for traveling expenses under section 162.”
The court summarized the law as follows:
[T]he ultimate allowance or disallowance of a deduction is a function of the court’s assessment of the reason for a taxpayer’s maintenance of two homes. If the reason is perceived to be personal, the taxpayer’s home will generally be held to be his place of employment rather than his residence and the deduction will be denied. If the reason is felt to be business exigencies, the person’s home will usually be held to be his residence and the deduction will be allowed.
The court also cited Revenue Ruling 73-529, 1973-2 C.B. 37, which deals specifically with taxpayers who live on the road. It lists three extra factors to help decide whether a taxpayer is an itinerant: (i) the business connection to the locale of the claimed home; (ii) the duplicative nature of the taxpayer’s living expenses while traveling and at the claimed home; and (iii) personal attachments to the claimed home.
Court Conclusion – Tax Turtle
The IRS argued that Mr. Jacobs didn’t reside in Cottage Grove, but was either living on the road without a permanent residence or in California during 2007 and 2009 when he was between jobs.
The tax court evaluated the facts and agreed with the IRS. It concluded that Mr. Jacobs was “an itinerant worker–a tax turtle–whose tax home followed him on the road.” Thus, the court did not allow Mr. Jacob to deduct his travel expenses.