Away from Home Expenses Allowed for Non-Overnight Trip

Away from Home Expenses Allowed for Some Non-Overnight Trips

This taxpayer worked as a ferry boat captain. He was responsible for a crew and up to 1,200 passengers on each trip. He generally worked up to 17 hours a day, seven days on - seven days off. He typically reported for work as early as 5 a.m. and departed as late as 10 p.m.

During the peak season during 2001 he had mid-cruise layovers of one hour, while it increased to five hours in 2002 and 2003. During the nonpeak season the layovers were typically six hours in duration during this entire three year period. The total time worked varied for many reasons including US Customs and Board Protection security checks, weather, maintenance problems, and high sea levels.

Often the taxpayer would sleep in a cot at the company’s offices, although he was not required to do so nor was he paid for the time. Due to the length of his workdays, the taxpayer claimed a meal and incidental expense deduction based on the IRS M&IE rate for the locality of travel.

IRS denied the deductions since the taxpayer wasn’t away from home overnight. Tax Court approved some and denied some, citing Williams v Patterson, 286 F.2d 339 as saying a physical overnight is not a requirement in order for the deduction to be allowed. It must be reasonable for the taxpayer to need and to obtain sleep or rest in order to meet the exigencies of his employment. The “rest period” must also be due to the need for rest and not just the result of scheduling.

Tax Court approved the deductions for the trips when the taxpayer had the longer rest periods (nonpeak season) but did not allow the deductions during the shorter rest periods (peak season). The taxpayer testified that during the peak season there were often two captains with the other captain being in charge of the ship during the layover. The taxpayer also testified that he did sleep or rest while the other captain took command, he did not produce evidence showing the rest period was part of a layover (released time) or was of sufficient duration that is caused him to incur a significant increase in expenses.

IRS tried to require the taxpayer to prorate his meal allowance for partial days, but Tax Court determined a full day’s meals were reasonable based on Revenue Procedure 2002- 63 (per diem revenue procedure). Tax Court did agree with IRS’ position of applying the 50% reduction commonly applicable to meal expenses.

Bissonnette, 127 TC No 10, Notice 2007-47

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