20.8 Fixing a Tax Home If You Work in Different Locations

If you regularly work in two or more separate areas, your tax home is the area of your principal place of business or employment. You are away from home when you are away from the area of your principal place of business or employment. Therefore, you may deduct your transportation costs to and from your minor place of business and your living costs there.

Professional sports players, coaches, and managers.

When the only business of such persons is the professional sport, their home is the “club town.” But if they are in another business in addition to their professional playing, how much time is spent and how much is earned at each place determines whether their club’s hometown or the place of their off-season business is their tax home. If it is the club’s hometown, they deduct travel and living expenses while away from that town—including the time they are where the second business is. (If the second place is where their families also live, they may not deduct the families’ expenses there.) If the town where the other business is located is the tax home, then expenses in the club’s hometown may be deducted.

Airline pilots.

It is important for airline pilots who fly in and out of various locations to determine a tax home for income and deduction purposes. Generally, the IRS considers an airline pilot’s tax home to be the airport at which the pilot is regularly based. For example, in one case the IRS barred a pilot from claiming the foreign earned income exclusion (36.1) because his tax home was deemed to be his base in New York, rather than in London, where he and his wife actually lived.

EXAMPLES
1. Sherman lived in Worcester, Mass., where he managed a factory. He opened his own sales agency in New York. He continued to manage the factory and spent considerable time in Worcester. The larger part of his income came from the New York business. However, he was allowed to treat New York as his minor place of business and to deduct his travel expenses to New York and his living expenses there because he spent most of his time in Worcester and his income there was substantial.
2. Benson, a consulting engineer, maintained a combination residence-business office in a home he owned in New York. He also taught four days a week at a Technological Institute in West Virginia under a temporary nine-month appointment. He spent three-day weekends, holidays, and part of the summer at his New York address. At the Institute, he rented a room in the student union building. The IRS disallowed transportation expenses between New York and West Virginia and meals and lodging there as not incurred while away from home. The Tax Court disagreed. A taxpayer may have more than one occupation in more than one city. When his occupations require him to spend a substantial amount of time in each place, he may deduct his travel expenses, including meals and lodging, at the place away from his permanent residence. That Benson’s teaching salary happened to exceed his income from his private practice does not change the result.
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image Planning Reminder
Determining Your Principal Place of Business
If you have more than one regular place of business, your tax home is your principal place of business. Your principal place of business or employment is determined by comparing: (1) the time ordinarily spent working in each area; (2) the degree of your business activity in each area; (3) the amount of your income from each area; (4) the taxpayer’s permanent residence; and (5) whether employment at one location is temporary or indefinite.
No single factor is determinative. The relative importance of each factor will vary depending on the facts of a particular case. For example, where there are no substantial differences between incomes earned in two places of employment, your tax home is probably the area in which you spend more of your time. Where there are substantial income differences, your tax home is probably the area in which you earn more of your income.
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