Court rules on 'temporary' living arrangement

A recent decision by the United States Tax Court addresses an issue faced by many two-income couples in this difficult job market.

Thomas and Janice Scroggins lived in Georgia. Thomas provided highly specialized consulting services to hospitals. Janice was a civil service employee. When Thomas could not find work in his chosen field in Georgia, he contracted his services to hospitals in Florida and California.

From June 2004 through January 2008, Thomas leased an apartment in California, rolling over a six-month lease. During this same period, Janice remained in Georgia. The Scroggins claimed a tax deduction for Thomas' living expenses in California as expenses incurred while temporarily away from home on business.

The IRS asserted, and the Tax Court agreed, that Thomas' tax home was in California, where his employment was located. He was in California for an extended period of time, not on a temporary business trip. Thomas' living expenses while in California were nondeductible personal expenses. His travel costs between Georgia and California were nondeductible commuting costs. The fact that Janice's tax home remained in Georgia did not affect Thomas' situation.

The tax law does not define temporary. But court cases show that if the length of time away from home approaches or exceeds one year, the IRS is likely to question the temporary nature of the assignment. (Scroggins v. Commissioner, TC Memo 2011-103, May 18, 2011)

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