1) that the expenses are ordinary and necessary,
2) that the taxpayer is away from home on business when he incurred the expense, and
3) the expense was incurred in pursuit of a trade or business.
The key words among those requirements are “away from home,” a seemingly straightforward phrase whose interpretation has spawned a lengthy case history. You see, in the eyes of the IRS, your tax home is not necessarily the same as the place where host your weekly Bunco game, receive your cherished subscription to Cracked, and store that ’69 Mustang you’ve been meaning to fix up.
The Tax Court has previously interpreted a taxpayer’s “home” under Section 162 to mean his principal place of employment and not where his personal residence is located. Mitchell v. Commissioner, 74 T.C. 578 (1980) The court also recognizes an exception to this general rule in situations where the taxpayer is away from his home on a temporary rather than indefinite or permanent basis.
In Scroggins v. Commissioner, T.C. Memo 2011-103 (2011), the taxpayer (Scroggins) and his wife lived in Georgia, but worked primarily in California. Using the taxpayer’s ATM and banking activity, the IRS argued that Scroggins spent the majority of the years at issue in California, a sufficient amount of time to make California his tax home.
The Tax Court agreed, and denied all of Scroggins travel, lodging, and meals expenses related to his time in California. In reaching its decision, the court noted that because Scroggins particular line of business (medical consultant) could not be supported locally in Georgia but rather required a metropolis with large hospitals , it was “reasonably known to Mr. Scroggins that he would be employed for a very long time away from Georgia.” Also noting that Scroggins lack of local working relationships meant he had no business reason for his tax home to be in Georgia, the Tax Court concluded that Scroggins tax home was indeed in California.