Driving Expenses or Commuting? The Tax Court rules

May 4, 2015

It might seem like driving expenses to some, but to the IRS, it’s commuting.

Lonnie Bartley, a construction supervisor for Far West Contractors Corp. in California, was denied a deduction for nearly $25,000 in business expenses because the Tax Court said they were actually nondeductible commuting expenses.

Bartley’s 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 it reimburse him for mileage.

On his 2010 Form 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 Bartley a deficiency letter regarding the 2010 return. It was challenging 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 where he worked were determined by the court not to be temporary work locations 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.

The court ruled the $24,448 in auto-related expenses was nondeductible (Lonnie J. Bartley and Kimberly A. Bartley v. Commissioner, U.S. Tax Court, T.C. Summary Opinion 2015-23, March 31, 2015).