In article <gm272r$25l$1[at]reader1.panix.com> ,
Dick Adams <rdadams[at]panix.com> wrote:

- quote -

Why? There's a business reason for flying you home: it's cheaper for
the company.

Seth

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On Sat, 31 Jan 2009 14:46:48 EST, Alan <sfcnm-mtm[at]yahoo.comwrote:

- quote -

I agree with Alan. In your example the expenses are not
income to the employee.

---
Drew Edmundson, CPA
Cary, NC

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On Fri, 30 Jan 2009 18:53:29 EST, rdadams[at]panix.com (Dick
Adams) wrote:

- quote -

Sorry, I don't see either of these examples in the decision.

---
Drew Edmundson, CPA
Cary, NC

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Dick Adams wrote:
- quote -

did not repudiate the Andrews case ( Andrews v. Commissioner, 931
F.2d 132 (1st Cir. 1991)). They also provided an example
of an attorney who has his home and office and business in
Minneapolis but has to travel so much that he spends more time
away from home. "Nevertheless he can deduct his
traveling expenses. His work requires him to maintain a
home within normal commuting distance of Minneapolis
because that is where his office is, but his work also
requires him to travel, and the expenses he incurs in
traveling are necessary to his work and he cannot offset
them by relocating his residence to the places to which
he travels because he has to maintain a home near his
office."

I see nothing in the CA-7 decision that would have created income
for you. Your traveling expenses were no different than the
lawyer example used by the court.

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Alan <sfcnm-mtm[at]yahoo.com> wrote:
- quote -

See the bag of worms this creates.

In the 60's, I worked for a company who sent me from Chicago
to Asheville every week for 10 weeks. The round trip airfare
was less than 3 nights lodging so they paid my way home every
Friday. My only reason for returning home was a conjugal bed.
I was a W-2 employee. The company was in a Chicago suburb,
but I was not required to show up during this time.

Under Posner opinion, it seems that I would have to declare
that travel as income and pay taxes on it.

Dick

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Stuart A. Bronstein wrote:
- quote -

changed your tax home to your new main place of work. The office
in your family home is no longer your main place of work. Your
cost to go to and fro from your family home to your new tax home
is commuting.

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Alan <sfcnm-mtm[at]yahoo.com> wrote:

- quote -

To me the difference is between having a home office and not. Say
you're a 1099 contractor and have a home office that is your principal
place of "business" but you often work for clients on their sites. If
you have a long term contract but return to your home office each week,
there's a business reason for that, so the travel is deductible.

On the other hand if all is the same except that you are on a W-2, your
travel is for personal reasons and is not deductible.

Stu

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Alan <sfcnm-mtm[at]yahoo.com> wrote:

- quote -

We are in agreement. However, these contracts often call for the
client to pay per deim. lodging, and travel expenses and it does
not get 1099'ed.

Many equipment manufacturers have mechanics and engineers who
run around the country doing installations and troubleshooting
for them. Some of these people live in far away places, leaving
home for 3-12 weeks at a time, and returning home, at least
monthly, where they have family, but no business reason.

The Posner opinion directly affected someone who wasa W-2 employee
and was living in two places. But the issue of "What was the
business reason?" will affect many people.

Dick

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Dick Adams wrote:
- quote -

different. You sent B to work in Minneapolis for two years. You
said A travels all the time. You didn't say you sent A to St.
Louis to work a job that was expected to last two years.

If A was sent to St. Louis to work a job that was expected to
last two years (the same scenario as B), then if A's employer
reimbursed his travel back and forth from his home in Memphis,
that reimbursement is taxable compensation. A's place of business
is now St. Louis and the cost to go back and forth to Memphis is
commuting.

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- quote -


- quote -

It's in the interpretation.

Consider two Forensic Accountants.

"A" lives in Memphis. He has been an employee of a CPA firm
located in Dallas for the last six years. His arrangement is
that he travels 100% of the time and returns home on the
weekends. He is working at a client site in St. Louis.

"B" lives in Chicago and was unemployed when he got a contract
with a company in Minneapolis. The projects are identical and
started in August 2007 and will probably be last through August
2009. Both fly home weekly to be with their families, i.e., no
business reason.

"A" is a W-2 employee whose expenses never show up on a 1099
because they are under an accountable plan. "B"'s an independent
contractor with an IRS approved SS-8 and his expenses are buried
into his project bid.

Using Posner's position that a business reason is needed for the
deductibility of business travel, both should be taxed on their
travel. But, I repeat myself, "A"'s travel is paid by contract
under an accountable plan and "A" never sees a 1099. And that
is the difference to which I refer.

Dick

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On Thu, 29 Jan 2009 15:33:34 EST, rdadams[at]panix.com (Dick
Adams) wrote:

snip
- quote -

I only skimmed the decision but I don't see where the judges
discussed how a contractor would be treated differently
under these circumstances. If you recall, please provide a
clue of where to look.

Thanks,

---
Drew Edmundson, CPA
Cary, NC

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Alan <sfcnm-mtm[at]yahoo.com> wrote:

- quote -

1706 was a last minute, undebated addition to the '86 Tax Act.
It said that enginners, draftsmen, systems analysts, computer
programmers, etc. were employees (for tax purposes) of third
party contractors. The result was many of the highly qualified
people went to work for clients, most of the rest became
associates of third party contractors, and a few of us held up
the little finger our left hand to 1706 and stayed out there.
(The little finger is the non-Hallmark Bird. It is what you use
when "You don't want to send the very best").

This is what created the IRS 20 questions on who is an employee
and who is an independent contractor. It is also what sent me
to graduate school to become a University Professor.

Under Judge Posner's well-thought-out decision. Those who
have there travel home paid by contract are in a superior
financial situation to those who pay the travel themselves.

I am unable to disagee with Judge Posner's conclusions based
on the law as is. The law needs to be changed especially in
view of the current degree of relocation for employment
purposes.

Dick

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Dick Adams wrote:
- quote -

by your scenarios. What is this infamous Sec. 1702 (that I am
unable to find) that seems to make your taxpayer some sort of
employee that is different than other employees?

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rdadams[at]panix.com (Dick Adams) wrote:

- quote -

Probably shouldn't. But that is the law at the moment. With all the
talk about "family values" over the last eight years, I'm surprised
they hadn't changed the law to allow for a travel deduction for
reasonable personal reasons.

Stu

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Dick Adams <rdadams[at]panix.com> wrote:

- quote -

Because if there was not an underlying intent to treat employees
and the self-employed differently for tax purposes, they wouldn't
define these to be two different entities in the first place.

Disallowing the deduction for single-day plane travel, for
self-employed individuals for whom their home is not
a place of business, does seem particularly unfair but
those are the rules, last time I read them.

Steve

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Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:

- quote -

This brings us to the consultant who subcontracts from various
contractors for anywhere from six months to a year at a time.
He returns home every weekend and his expenses are billed to
the end user. Let's assume he is in his late 30's with a
stay-at-home wife and four children ages 6 mos to 7 yrs old.
He catchs a very early Monday morning flight to the end user
and an afternoon flight home. His only reason for returning
home is that it is his tax home.

The facts reamin the same except that he takes on a two year
project that could be indefinite. He gets per deim under an
accountable plan under whish he rents an apartment near the
end-user site. He gets a W-2 because the infamous Section
1702 of the 1986 Tax Act makes him an employee of the contractor
and he never sees a 1099 for his expenses.

Why should he treated differently from any other W-2 employee
who pays these expenses himself?

Dick

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rdadams[at]panix.com (Dick Adams) wrote:
- quote -

I agree that on a policy level (family values and all that) the
outcome is not the way I would prefer it. However the opinion is an
excellent analysis of the law, and probably the "correct" decision
based on the law.

Stu

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Alan <sfcnm-mtm[at]yahoo.com> wrote:

- quote -

http://tinyurl.com/cykkpm

- quote -

Thank you for posting this, Alan.

I do not care for this decision at a personal level. It's my
impression that Judge Posner wasn't thrilled with it either.
But he continues his reputation for clear, comprehensive, and
rational opinions.

Dick

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I found the court case cited below to be of interest to those of
you who deal with the deductibility of travel as a business
expense. This the first case I know of where a Circuit Court has
rejected many of the arguments used by the Tax Court in judging
when travel away from home is deductible. Specifically, the court
rejects the temporary or indefinite decision process and the
personal choice vs reasonableness response to employment
situation argument. The court falls back to two very old court
cases for its argument.
Hantzis vs Comm'r, 638 F.2d 248 (1st Circ. 1981)
Commissioner v. Flowers, 326 U.S. 465, 474 (1946)

Both of these decisions focused on the “business exigencies”
rule: ".... unless the taxpayer has a business rather than a
personal reason to be living in two places he cannot
deduct his traveling expenses if he decides not to move."

http://www.ca7.uscourts.gov/fdocs/do...8-2169_003.pdf

Wilbert vs. Comm'r, CA-7, 2009-1 USTC ¶50,171 Affirming the Tax
Court, 93 TCM 1363

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