Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 76-2

1976-1 C.B. 82

Section 82
Section 162
Section 217

IRS Headnote

Temporary lodging allowances paid Armed Forces personnel. Temporary lodging allowances paid Armed Forces personnel in connection with changes in their permanent duty stations are includible in gross income and, based on an agreement in effect between the Secretary of the Treasury and the Secretary of Defense, temporary lodging expenses are deductible to the extent provided under section 217 of the Code without regard to the 50-mile and 12-month requirements of section 217(c). The temporary lodging expenses are not deductible as business expenses. Rev. Rul. 72-123 superseded.

Full Text

Rev. Rul. 76-2

Advice has been requested concerning the treatment, for Federal income tax purposes, of amounts paid to, and expenses incurred by, members of the Armed Forces under the circumstances described below.

A, a member of the Armed Forces, was assigned to a new permanent post of duty in Europe for one year. Upon arrival at the new post of duty A and A's family were unable to move into suitable Government quarters because their household goods had been delayed in transit. Consequently, A and A's family had to reside in a hotel for 45 days during which time they incurred $3,200 in living expenses.

A's branch of the Armed Forces paid A a temporary lodging allowance of $2,700, computed at a rate of $30 per day plus an additional $10 per day for each of A's three dependents. B, a member of the Armed Forces who had no dependents, was assigned to a new permanent post of duty in Europe for seven months. The new post was 20 miles from B's previous permanent post of duty. During the first 45 days after B's arrival at the new post of duty there were no Government quarters available and B had to reside in a hotel. During this time B incurred $2,000 in living expenses while searching for a new residence.

B's branch of the Armed Forces paid B $1,350 as a temporary lodging allowance based on a rate of $30 per day.

Section 405, title 37 U.S.C. provides, in part, that the Secretaries concerned may authorize the payment of a per diem, considering all elements of the cost of living to members of the uniformed services under their jurisdiction and their dependents, including the cost of quarters, subsistence, and other necessary incidental expenses, to such a member who is on duty outside of the United States or in Hawaii or Alaska, whether or not that member is in a travel status. However, dependents may not be considered in determining the per diem allowance for a member in a travel status.

Temporary lodging allowances paid to members of the Armed Forces of the United States under section 303(b) of the Career Compensation Act of 1949 (codified as section 405, title 37 U.S.C. (1970)) are for the purpose of partially reimbursing a member for the more than normal expenses incurred at hotels or hotel-like accommodations and public restaurants upon initial arrival at, or immediately preceding departure from, a permanent duty station outside the United States and pending assignment of Government quarters or completion of arrangements for other quarters. In the case of officer personnel, this allowance is paid in addition to the regular allowances for quarters and subsistence. See Rev. Rul. 72-123, 1972-1 C.B. 26.

Section 82 of the Code, added by the Tax Reform Act of 1969, Pub. L. 91-172, 1969-3 C.B. 10, provides that with respect to taxable years beginning after December 31, 1969, there shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence that is attributable to employment or self-employment.

Section 217(b)(1)(C) of the Code defines the term "moving expense" to include the reasonable expenses of traveling (including meals and lodging), after obtaining employment, from the former residence to the general location of the new principal place of work and return, for the principal purpose of searching for a new residence.

Section 217(b)(1)(D) of the Code defines the term "moving expense" to include the reasonable expenses of meals and lodging while occupying temporary quarters in the general location of the new principal place of work during any period of 30 consecutive days after obtaining employment.

Section 217(b)(3)(A) of the Code provides, in part, that the aggregate amount allowable as a moving expense deduction under section 217 in connection with a commencement of work that is attributable to expenses described in subparagraphs (C) and (D) of section 217(b)(1) shall not exceed $1,000.

Section 217(c)(1) of the Code provides, in part, that no moving expense deduction shall be allowed unless the taxpayer's new principal place of work is at least 50 miles farther from the taxpayer's former residence than was the taxpayer's former principal place of work.

Section 217(c)(2) provides, in part, that no moving expense deduction shall be allowed unless during the 12-month period immediately following the taxpayer's arrival in the general location of the taxpayer's new principal place of work, the taxpayer is a full-time employee, in such general location, during at least 39 weeks.

Section 2 of Pub. L. 93-490, 1974-2 C.B. 451, provides, in part, that notwithstanding the provisions of section 82 and section 217 of the Code, the Secretary of the Treasury, in the administration of those sections is authorized to enter into an agreement with the Secretaries of Defense and Transportation under which the respective Secretaries will not be required to withhold tax on, or to report, moving expense reimbursements made to members of the Armed Forces. Section 2 of Pub. L. 93-490 also authorizes the Secretary of the Treasury to permit any taxpayer who is a member of the Armed Forces to deduct any amount paid by that member as moving expenses in connection with any move required by the Secretaries of Defense and Transportation, in excess of any reimbursement received for such expenses, without regard to the provisions of section 217(c) to the extent it is otherwise deductible under section 217.

On March 12, 1975, an agreement was entered into between the Secretary of the Treasury and the Secretary of Defense pursuant to section 2 of Pub. L. 93-490. See Rev. Proc. 75-55, 1975-2 C.B. 595.

The agreement provides, in part, that there will be a moratorium on withholding and reporting of moving expense reimbursements of members of the Armed Forces that are under the jurisdiction of the Department of Defense. The agreement also provides that any taxpayer who is a member of such Armed Forces may deduct amounts paid by that member in connection with any move required by the Secretary of Defense, without regard to the provisions of section 217(c) of the Code, but only to the extent such amounts are otherwise deductible under section 217. The agreement is effective for taxable years ending before January 1, 1976.

Rev. Rul. 55-571, 1955-2 C.B. 44, holds that members of the Armed Forces of the United States on permanent duty assignments at official stations overseas are not traveling "away from home" and may not deduct their expenses for meals and lodging at such locations as a business expense.

Both A and B received temporary lodging allowances as payment for the expense of moving from one residence to another in connection with a change in their permanent duty stations. The provisions of Section 2 of Pub. L. 93-490 and the agreement entered into thereunder only provide that the Secretary of Defense will not be required to withhold tax on, or to report, moving expense reimbursements made to members of the Armed Forces, and do not alter the requirement under section 82 of the Code that such moving expense reimbursements be included in a recipient's gross income.

Accordingly, the $2,700 and $1,350 paid respectively as temporary lodging allowances to A and B in connection with the changes in their permanent duty stations are includible in their respective gross incomes under section 82 of the Code. See Rev. Rul. 72-123.

A and B each incurred expenses that are defined to be moving expenses under either subparagraph (C) or (D) of section 217(b)(1) of the Code. However, section 217(b)(3)(A) places a dollar limit of $1,000 on the aggregate amount deductible under those subparagraphs. The moving expense agreement provides that as members of the Armed Forces A and B may deduct amounts paid by them in connection with any move required by the Secretary of Defense, without regard to the provisions of section 217(c) (pertaining to conditions) but only to the extent such amounts are otherwise deductible under section 217. Thus, the only provisions of section 217 waived by the moving expense agreement are the conditional provisions relating to (1) the minimum distance moved, and (2) the duration of employment at the new place of employment. Therefore, even though B's move of 20 miles and for a period of only seven months does not satisfy either of the requirements of section 217(c), B still may benefit from the provisions of the moving expense agreement.

Accordingly, A may deduct $1,000 as a moving expense for the reasonable expenses of meals and lodging while occupying temporary quarters in the general location of A's new permanent post of duty during any period of 30 consecutive days after beginning work at the new post of duty.

B may also deduct $1,000 as a moving expense for the reasonable expenses of meals and lodging while occupying temporary quarters in the general location of B's new permanent post of duty during any period of 30 consecutive days after beginning work at the new post of duty, provided that the moving expense agreement between the Secretaries of Treasury and Defense, set forth in Rev. Proc. 75-55, 1975-2 C.B. 595, is in effect during the taxable year in which B incurs the expenses.

Further, neither A nor B is traveling away from home and may not deduct the expenses incurred for meals and lodging while occupying the temporary quarters as a business expense.

Rev. Rul. 72-123 is amplified and, as amplified, is superseded since the provisions thereof are restated herein.