## Facts

- The Internal Revenue Service issued administrative guidance addressing when daily transportation costs between a taxpayer’s residence and a work location are deductible as business expenses.
- The ruling applies I.R.C. § 162(a) (ordinary and necessary business expenses) and contrasts it with I.R.C. § 262 (nondeductible personal expenses), including commuting.
- The ruling addresses recurring uncertainty in applying the commuting rule and consolidates prior IRS guidance on temporary work locations.
- The ruling incorporates the statutory “principal place of business” home-office concept under I.R.C. § 280A(c)(1)(A) and relies on the approach that travel between two business locations is generally deductible.
- The ruling adopts a temporal framework distinguishing “temporary” work locations from indefinite ones using a one-year expectation standard.

## Issues

1. Under what circumstances are daily transportation expenses between a taxpayer’s residence and a work location deductible under I.R.C. § 162(a) rather than treated as nondeductible commuting under I.R.C. § 262?
2. When does a residence qualify as a business location so that travel from the residence to other work sites is treated as travel between business locations?
3. How is a “temporary work location” defined for purposes of deducting daily transportation expenses?

## Decision

- The IRS reaffirmed the general rule that daily travel between a taxpayer’s residence and a work location is nondeductible commuting.
- The IRS held that daily transportation expenses are deductible under § 162(a) in three circumstances:
  - Travel between the residence and another work location in the same trade or business when the residence is the principal place of business for that trade or business.
  - Travel between the residence and a temporary work location outside the metropolitan area where the taxpayer lives and normally works.
  - Travel between the residence and a temporary work location in the same trade or business, regardless of distance, if the taxpayer has one or more regular work locations in that trade or business.
- The IRS defined a “temporary work location” as one realistically expected to last (and that does in fact last) one year or less; if it is expected to last more than one year (or there is no realistic expectation of one year or less), it is not temporary.

## Legal Principles

- Commuting between a taxpayer’s residence and the taxpayer’s regular place of business or employment is generally a nondeductible personal expense under § 262 and related regulations.
- Transportation between one business location and another business location is generally deductible under § 162(a).
- A residence treated as the taxpayer’s principal place of business for a trade or business is a business location for that trade or business; travel from that residence to other work locations in the same trade or business is treated as travel between business locations.
- Daily transportation to a temporary work location may be deductible even when the residence is not a business location, subject to the metropolitan-area limitation for the “outside the metropolitan area” rule and the requirement of an existing regular work location for the “temporary location regardless of distance” rule.
- Temporary status turns on realistic expectations and duration: once expectations change so that an assignment is expected to exceed one year, transportation deductions tied to temporary status generally cease from the point of changed expectation.

## Conclusion

The ruling maintained the nondeductibility of ordinary commuting but established clear exceptions permitting § 162(a) deductions for daily transportation when the home is the principal place of business for the trade or business or when the taxpayer travels to qualifying temporary work locations under specified conditions, using a one-year expectation test to distinguish temporary from indefinite work sites.


Rev. Rul. 99-7, 1999-1 C.B. 361 (1999)