Tax Home

[Gary]

I have a client that claims that Louisiana is his tax home. He is an electrician and the union finds him jobs. For the last four years, his jobs have been in Arizona and California. He has a van in which he carries all his tools.

He owns a trailer in Louisiana which has a telephone and to which he has mail delivered. He has no mortgaqge and there is no real estate tax in LA. He votes in Louisiana and has a Louisiana driver's license. He goes home only ocassionally, usually when unemployed (between jobs).

In 2002 he worked in California and also received unemployment. In 2003 he worked in either California or Arizona (or both), I'm not sure. He worked in Arizona from October 2004 until March 2005 and then was unemployed the rest of the year. He received unemployment from Arizona. He did go home for the month of December.

His 1040 in 2002 showed LA as his tax home and he deducted all business expenses (hotel, car expenses etc) and filed a NR California return. He has prepared similar returns for 2003 and 2004.

It is my opinion that his tax home is not LA and he is a transient worker, and therefore cannot deduct any employee business expenses (other than his tools, etc).

Do all your experts agree with me. Any comments will be appreciated.

Thanks,

Gary

[Bees Knees]

TTB, page 8-11 lists three things to consider:

1) Business is conducted in the area of a main home and the taxpayer uses that home for lodging while doing business in the area.

2) The taxpayer has living expenses at a main home that are duplicated when business requires the taxpayer to be away from that home.

3) The taxpayer has not abandoned the area in which both his or her historical place of lodging and claimed main home are located, the taxpayer has family members living at the main home, or the taxpayer often uses that home for lodging.

Does he pass test (1)?

No, you said the union always sends him to other parts of the country.

Does he pass test (2)?

Sort of...maybe. He has no mortgage and no real estate taxes. I suppose there are always minor costs of keeping his trailer in working condition for him to return to.

Does he pass test (3)?

Yes. He has not abandoned his trailer, returns there on occasion between jobs, and has his mail delivered there.

TTB then says if only one of the above is satisfied, the taxpayer is a transient worker. So in my opinion this is a borderline case. Maybe yes, maybe no with number (2) above going either way.

There is no question if any of his jobs last more than one year, no travel expenses are deductible. But they all seem to be less than a year.

I would go over each of the above three tests with him, and give him the rules that apply depending on the results. If it is a borderline case, let him make the decision but he would need to sign a statement for you to keep in your files that you went over the rules with him and he decided to take a chance.

[Unregistered]

Is he paying rental for a space to park the trailer while away?

[Gary]

Thanks

Thanks B K. I have thought this over long and hard and discussed it with the client and decided that he as enough involvement in LA to justify it as his tax home. I realize that it is marginal, and he understands this.

Gary

[Gretel]

Confused

Please help my confused mind.

I have some clients in same situation, union work all over the place, but home here, including ownership of house and horses. Month of unemployment spent at home. Since two factors are totally met I always felt it justified to take away from home expenses, but never really felt at peace with it.

Recent discussions about making sure someone has a taxhome, not home place, but f.e. office of major employer, where he has to report to once in a while, had make me think only if you have somehow a taxhome, which is not your home place, then it's OK to take away from home deductions. (Of course any tax home can be challenged, if not visited frequently).

Anyway, both opinions seem to contradict each other. Can anyone help me back to peace of mind again, or am I hopeless?

[Bees Knees]

Travel expenses have to be away from the tax home to be deductible. In your case with union workers traveling to various locations on a temporary basis, the trips are deductible if away from the metro area. In other words, out of town travel expenses - deductible even though the taxpayer has no regular place of employment.

In contrast, a person who works for the union and travels around to various job sites in the same metro area where the travel is not out of town - not deductible if their is no regular place of work.

[Gretel]

Thanks Bees. Still confused about tax home. The scenarios I have on my mind are all hundreds of miles away from home (tax home?). I am pretty clear on non-deductibility if inside metro area.

F.e. what about a mariner who drives thousands of miles to LA to work at various locations out in Gulf of Mexico. Doesn't report to any office. Gets notice at home (MT). Owns house here and spends months living here. Is his home considered his tax home?

Of course, we are only talking about travel expenses here, since everything else is covered anyway. Don't want into discussion about Martin Kapp/Knapp.

Thanks again.

[Bees Knees]

I think in that case, you would consider the three points listed above. If 2 out of 3, you get tax home and all travel expenses. If 1 out of 3, transient worker, no tax home, no travel expense deduction.