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Wednesday, October 25, 2006


UPDATE: For more information on these issues, you can visit the website This is the website of Martin Kapp, the CPA who participated in the litigation before the IRS.
Internal Revenue Code Section 162(a)(2) allows a taxpayer to deduct traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while "away from home" in the pursuit of a trade or business. For purposes of Section 162, the term "home" generally means the taxpayer's principal place of employment and not where his or her personal residence is located.

Under the Sleep or Rest Rule, which has been developed in a series of tax cases to determine whether a taxpayer is away from home on short duration business trips, (a) if the nature of a taxpayer's employment was such that when away from home, during scheduled break times, it was reasonable for him to need and to obtain sleep or rest in order to meet the exigencies or business demands of his employment, and (b) the breaks were of sufficient duration to give rise to increased expenses, expenses for this purpose would be traveling expenses under Section 162(a)(2).

Marc G. Bissonnette was a ferryboat captain for a company that carried travelers on sea voyages to destinations on Puget Sound, Washington. The company's home port was in Seattle, Washington. He worked approximately 15- to 17-hour days on turnaround runs completed within 24 hours that each included a 6-hour layover at an away from-home port during off-season voyages and a 1/2- to 1-hour layover at an away from home port during peak-season voyages. He paid for his meals and incidental expenses while traveling, and sought to deduct them. The IRS challenged the deductions, asserting that the taxpayer was not "away from home" under the Sleep or Rest Rule.

The Tax Court made short shrift of the taxpayer's arguments as to the peak season trips. The layover on those trips was less than an hour. Noting that the released time must be of a sufficient duration that it would ordinarily be related to a significant increase in expenses, the meals taken during the short layover were found not deductible.

In regard to the off-season trips, the IRS argued that the longer rest period came about solely as a result of scheduling, rather than the taxpayer's need for sleep and rest, and thus should not be deductible. The Tax Court reviewed the facts and circumstances of the taxpayer's typical workday, and disagreed, noting that it was reasonable for the taxpayer to obtain sleep or rest in order to meet the exigencies and business demands of his employment. Further, the Court noted that the released time of 6 to 7 hours was sufficient in duration that it would normally be related to an increase in expenses. Consequently, the Tax Court allowed the meal expenses for the off-season trips.

Marc G. Bissonnette, et ux. v. Commissioner, 127 T.C. No. 10 (10/23/2006)

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