Karim Gobran and Ashley Smith-Gorbran v. Comm., T.C. Summary 2023-24
This post is part of our series on recent important tax cases that may be of interest to accounting, tax, and finance professionals. For more like this, see our Federal Tax Update and California Federal Tax Update, which offer a comprehensive analysis of the year’s most pivotal tax developments.
Multiple Years at Same Job Location is Not Temporary (Joseph & Ashley Ledbetter v. Comm., TC Summary 2023-19)
Mr. Ledbetter was a union craft sheet metal worker from 2000 through the years at issue – 2015 and 2016. He received all of his work assignments through his union. The work assignments he received were with a contactor to the Tennessee Valley Authority (TVA). The contractor did not hire sheet metal workers on a permanent basis. The length of the assignments varied with the size of projects and availability of funds. Mr. Ledbetter worked for the same contractor at TVA for the years 2012 through 2019 with no work stoppages greater than four months. He worked 235 days and 252 days during 2015 and 2016, respectively. The round trip from his home to his worksite at TVA was 184.2 miles. He deducted the cost of the travel from his home to the worksite as an employee business expense, a miscellaneous itemized deductions subject to the 2% floor.
The cost of commuting is a nondeductible personal expense. There are three exceptions to the general rule that a commute is nondeductible.
- When a taxpayer has a home office, travel from that home office is considered a business expense.
- Travelling between a taxpayer’s residence and a temporary work location outside the metropolitan area where the taxpayer normally lives and works is not commuting.
- Travel expenses between a taxpayer’s residence and temporary work locations, regardless of the distance, are deductible if the taxpayer also has one or more regular work locations away from the taxpayer’s residence. See Bogue, T.C. Memo 2011-164.
162(a)(2) provides for a deduction while traveling away from home with the caveat that taxpayers are “not treated as being temporarily away from home during any period of employment if such period exceeds 1 year.”
Ledbetter argues that both the second and third exceptions apply to his travel expenses. To support his claim, he provided documents from his employer: a Temporary Employment Agreement and a letter stating that “[a]ll contract work is considered temporary assignments.”
The court found that the union assignments were indefinite in length, but not “temporary” as that word is defined by caselaw. Because the work was not at a temporary work location, neither of the exceptions relied upon by Ledbetter could be relied upon to allow the travel deductions.
Comment. Many cases involving auto expenses center on substantiation. Not this one. The court noted, “Petitioners provided excellent records detailing Mr. Ledbetter’s daily travel, including times, locations, and business purpose.”