Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 63-64

1963-1 C.B. 30

Section 61 -- Gross Income Defined

Section 62 -- Adjusted Gross Income

Section 162 -- Business Expense Deduction

Section 265 -- Expense of Tax-Exempt Income

IRS Headnote

A member of  the Armed Forces of the United States who is serving on temporary active duty in the Ready Reserve, pursuant to Public Law 87-117, 10 U.S.C.A. 263, and who has a principal or regular place of business or employment which he has not abandoned and to which he will return after his period of service, is in a `travel status' while performing temporary duty with the Armed Forces. Such a member, who pays for his meals and lodging at his official military post of duty, is entitled to a deduction for expenses necessarily incurred for that purpose to the extent that such expenses exceed any nontaxable basic subsistence and quarters allowances received for those expenses. In determining the amount deductible, the expenses are limited to those which are directly attributable to the member's own presence at his military post and do not include expenses for members of his family.

Revenue Ruling 55-572, C.B. 1955-2, 45, distinguished.

Full Text

Rev. Rul. 63-64

Advice has been requested as to the deductibility, for Federal income tax purposes, of expenses for travel, meals and lodging, paid or incurred by a member of one of the Reserve components of the Armed Forcers serving on temporary active duty under Public Law 87-117, August 1, 1961, 10 U.S.C.A. 263.

Public Law 87-117 provides, in part, that, notwithstanding any other provision of law, until July 1, 1962, the President of the United States may, without the consent of the persons concerned, order any unit, and any member not assigned to a unit organized to serve as a unit, in the Ready Reserve of an armed force to active duty for not more than twelve consecutive months.

Section 162(a) of the Internal Revenue Code of 1954 provides for the deduction of all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Among the items representing business expenses are traveling expenses while away from home in the pursuit of a trade or business.

A taxpayer who is only temporarily working at a particular business location may be `away from home' provided he can show that his `home' is elsewhere. The location of a taxpayer's home for the purpose of determining his traveling expense deductions has been held generally to be at, or in the vicinity of, his principal or regular place of business. See Mort L. Bixler v. Commissioner , 5 B.T.A. 1181 (1927).

Revenue Ruling 60-189, C.B. 1960-1, 60, states that, generally employment at a given location will be treated as temporary if both its actual and anticipated duration is less than one year. However, an employment or stay of an anticipated or actual duration of a year or more at a particular location is viewed as strongly tending to indicate presence there beyond a temporary period, and cases involving an employment or stay of such duration will normally be subjected to close scrutiny.

Public Law 87-117, supra , empowered the President to order members of the Ready Reserve to active duty for a period not to exceed twelve consecutive months. Virtually all of the reservists who were summoned to active duty pursuant to the provisions of the law were actually released in less than a year. Moreover, under the attendant facts and circumstances, it is not unreasonable to conclude that such reservists did not, at the time they were ordered to active duty, expect to remain in active duty status for a full year.

Accordingly, it is concluded that any member of the Ready Reserve with a principal or regular place of business or employment which he retained during his period of temporary duty will be considered as having been in travel status while performing his temporary duty with the Armed Forces, provided he returned to his regular place of business or employment after concluding his tour of duty and provided he was stationed away from the general area where his civilian place of employment or other business was located.

A second question which arises is whether the expenditures for meals and lodging, if otherwise deductible, are deductibile in full or only to the extent that they exceed the member's basic subsistence and quarters allowance.

Section 1.61-2(b) of the Income Tax Regulations provides, in part, that subsistence allowances granted members of the Armed Forces and amounts received by them as commutation of quarters are to be excluded from gross income.

Revenue Ruling 55-572, C.B. 1955-2, 45, holds that expenses of transportation, meals and lodging incurred by members of the Armed Forces while in travel status or on temporary duty away from their permanent stations need not be offset by their nontaxable basic subsistence and quarters allowances in computing the amount of such expenses deductible under the provisions of section 162(a)(2) and section 62(2) of the Code.

As stated in Revenue Ruling 55-572, the basic allowances for subsistence and quarters are granted by law independently of whether the member is required to travel and are entirely unrelated to expenses incurred in travel. In other words, the expenses incurred for travel, meals and lodging are not allocable to the basic allowances for subsistence and quarters and have no relation to the members' statutory right to receive these basic allowances. Such members receive these basic allowances whether they are in travel status or not and the allowances are not considered as reimbursement for additional expenses incurred by reason of such travel.

However, Revenue Ruling 55-572 deals with a member's travel status in connection with his military duties while away from his permanent military post of duty. In the instant case, the reservist's basic allowances are not received to cover traveling expenses connected with his military duties. They are received in connection with performing his duties at his principal military post of duty. Therefore, his expenses for meals and lodging there are allocable to his basic subsistence and quarters allowances to the extent that allowances are received for such expenses.

Section 265 of the Code, with exceptions not here material, prohibits the deduction of an amount allocable to exempt income.

Since the basic subsistence and quarters allowances are exempt income, to allow a member of the Ready Reserve to exclude those allowances and to also allow deduction for the expenses for which the allowances are received, would result in a double tax benefit in violation of section 265 of the Code.

Accordingly, it is held that a member of the Armed Forces who is serving on temporary active duty in the Ready Reserve pursuant to Public Law 87-117, supra , and who has a principal or regular place of business or employment which he has not abandoned and to which he will return after his period of service, is in a travel status while performing temporary duty with the Armed Forces, provided he is stationed away from the general area where his civilian place of employment or other business is located. In such cases, a member who pays for his meals and lodging at his official military post of duty is entitled to a deduction for expenses necessarily incurred for that purpose to the extent that such expenses exceed any nontaxable basic subsistence and quarters allowances received for those expenses. In determining the amount deductible, the expenses are limited to those which are directly attributable to the member's own presence at his military post and do not include expenses for members of his family. The latter expenses are nondeductible personal expenses under section 262 of the Code.

A member to whom meals and lodging are furnished in kind incurs no expenses for that purpose and, therefore, is not entitled to a deduction.

Revenue Ruling 55-572, C.B. 1955-2, 45, is distinguished.