Is travel between work sites commuting or expense?

Construction supervisors and other employees who travel between different permanent job sites might want to take note of a recent Tax Court decision in California.

Lonnie Bartley, a construction supervisor for Far West Contractors Corp. in California, was denied a deduction for nearly $25,000 in auto expenses because the Tax Court said the driving expenses he claimed were actually nondeductible commuting expenses. [Lonnie J. Bartley and Kimberly A. Bartley v. Commissioner, U.S. Tax Court, T.C. Summary Opinion 2015-23, (Mar.31, 2015)]

His job required him to travel to various job sites in the metropolitan Los Angeles area, mainly, Redondo Beach and El Segundo. Far West did not provide Bartley with a vehicle nor did they reimburse him for mileage.

On his 2010 1040 return, Bartley claimed $24,448 in auto-related expenses on Form 2106 EZ, Unreimbursed Employee Business Expenses. He also had $2,482 in other unreimbursed expenses.

The IRS sent the Bartley’s a deficiency letter regarding the 2010 return. The IRS challenged the large amount of deductions on the Form 2106. In this situation, the taxpayer bears the burden of proof and must substantiate the deductions.

When expenses involve passenger automobiles and traveling while away from home, deductions are not allowed unless the taxpayer substantiates by adequate records or sufficient evidence the following three items:

  1. The amount of the expenditure or use
  2. The time and place of the expenditure or use
  3. The business purpose of the expenditure or use

The business purpose test is usually not met if commuting is involved. There are two exceptions to this general rule.

The first exception permits a taxpayer to deduct transportation expenses incurred in going between a taxpayer’s residence and a temporary work location outside the metropolitan area where the taxpayer normally lives and works.

The second exception permits a taxpayer to deduct commuting expenses between the taxpayer’s residence and a temporary work location, regardless of distance, if the taxpayer also has one or more regular work locations away from the taxpayer’s residence.

Bartley did not meet the first exception to the commuting rule because he both lived and worked in the metropolitan Los Angeles area. He did not meet the second exception because the two job sites he worked at were determined by the court not to be a temporary work location, because he already had worked at both the Redondo Beach and El Segundo locations for well over a year. Temporary work locations are usually job sites worked at for less than a year.

Bartley did not meet one of the exceptions to the commuting rule. Therefore he did not meet the business purpose part of the three-part test that must be met to deduct automobile expenses.

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