## Facts

- John S. Barrett (and, for 2011–2013, his spouse Maria T. Barrett) filed petitions challenging deficiency notices for tax years 2011–2014, including disallowed deductions and asserted additions to tax and accuracy-related penalties.
- The Barretts lived in Las Vegas, Nevada, maintained a Las Vegas home office, and owned multiple Las Vegas-area rental properties; Barrett supervised repairs and management activities.
- Barrett’s primary income came from video-production work for a single client that required periodic post-production work at a Washington, D.C. facility beginning in 2007.
- Barrett performed substantial pre-production work from Las Vegas and traveled to Washington, D.C. for post-production in discrete trips typically lasting about two weeks, totaling less than six months per year.
- From 2007–2013, Barrett rented a D.C. condominium for repeated stays, which he and his client considered more cost-effective than hotels.
- For 2011–2014, Barrett reported substantial income from this video-production work and claimed significant travel expenses tied to the D.C. trips; he also claimed business and rental-activity deductions.
- The Commissioner determined Barrett’s tax home was Washington, D.C. (disallowing many travel expenses under I.R.C. § 162(a)(2)), disallowed or reduced other claimed deductions for lack of substantiation, and asserted additions to tax under §§ 6651 and 6654 and accuracy-related penalties under § 6662(a).

## Issues

1. Whether Barrett’s tax home was Las Vegas or Washington, D.C. for purposes of deducting travel expenses “while away from home” under I.R.C. § 162(a)(2).
2. Whether petitioners substantiated business and rental-activity deductions beyond the amounts allowed by the Commissioner, including items subject to strict substantiation.
3. Whether petitioners were liable for additions to tax under §§ 6651(a)(1), 6651(a)(2), and 6654 and for accuracy-related penalties under § 6662(a).

## Decision

- The court held Barrett’s tax home remained Las Vegas, so he was “away from home” when working in Washington, D.C., making D.C. travel expenses deductible to the extent properly substantiated.
- The court allowed some claimed deductions but disallowed or reduced many items for insufficient substantiation and/or failure to show a business connection.
- The court sustained some asserted additions to tax and accuracy-related penalties and declined to impose others depending on the year, the Commissioner’s burden of production, and whether petitioners proved reasonable cause or other defenses.

## Legal Principles

- A taxpayer may deduct ordinary and necessary travel expenses incurred “while away from home” in pursuit of a trade or business under I.R.C. § 162(a)(2) only if the taxpayer is away from the taxpayer’s tax home and the expenses are otherwise allowable.
- A taxpayer’s “tax home” generally is the vicinity of the taxpayer’s principal place of business; a distant work location does not become the tax home when the taxpayer maintains an ongoing business base elsewhere and travel to the distant location is temporary or intermittent.
- Deductions are a matter of legislative grace; the taxpayer must prove entitlement and substantiate amount, timing, and business purpose.
- For travel, meals, lodging, and similar items governed by I.R.C. § 274(d), the taxpayer must satisfy strict substantiation requirements; unsupported estimates are not permitted where § 274(d) applies.
- For additions to tax and penalties, the Commissioner bears the burden of production; once met, the taxpayer must show reasonable cause, good faith, or another statutory exception to avoid liability.

## Conclusion

The Tax Court ruled that Las Vegas—not Washington, D.C.—was Barrett’s tax home, so his D.C. travel could qualify for deductions under § 162(a)(2), but it still reduced or denied many claimed deductions for inadequate proof and sustained certain additions to tax and accuracy-related penalties where statutory requirements were met and defenses were not established.


Barrett v. Comm’r, T.C. Memo. 2017-195 (2017)