There is no Place Like Home (or is There?)

Have you ever said something like “I can’t wait to go home?”  If so, you probably don’t know what the term “home” means.

What does the term “home” mean?  According to the IRS, the term “home” means the taxpayer’s “principal place of business.”  I am guessing that very few (if any) taxpayers would define the term in this manner.

Our federal tax code does not define the term “home,” even though it comes up in many tax contexts (such as whether travel expenses are deductible, whether income is excluded from income taxation pursuant to Section 911, and whether one or more states are able to impose their income and other tax on certain taxpayers).

Absent a statutory definition, various courts have stepped in to define the term “home.”  Many of these courts simply accept the absurd definition put forth by the IRS (see, e.g., Jordan v. United States).  More competent courts have at least put forth some effort to define the term on their own.  These courts have been less than successful, but at least they put forth the effort to try.

Take the Jordan case.  In this court opinion the eighth circuit court states:

A taxpayer’s “home” … “is his principal place of business, and the taxpayer is ‘away from home’ when required to travel to a vicinity other than his principal place of business for temporary work.”  As an exception to this rule, a taxpayer may also be considered “away from home” if his “‘employment outside the area of his regular abode will be for a ‘temporary’ or ’short’ period of time . . . .’”  With regard to the temporary employment situation, however, “the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year.”

In the Jordan case the taxpayer lived in Minnesota and his employer paid for him to commute to Alaska for work over a period that exceeded one year.  The court said that the travel expenses to travel to Alaska were not deductible becuase the taxpayer’s “home” was in Alaska.

It seems that the fear is that if the term “home” were to be defined in a way that is logical (i.e., to mean where the taxpayer actually lives), then taxpayers would opt to live in remote locations and use their travel expense deductions to offset their taxable income - which would make US business less productive at the expense of the US Treasury (i.e., everyone would live in Hawaii and work in the mid-west and deduct the travel expenses).

I can see that position, but, frankly, I don’t think that this is what the “law” says and I don’t think the courts are doing us any favors by making up a definition or following the absurd IRS definition.  It is a fundamental principle of law that where a statute contains an undefined term that is ambiguous, the courts MUST look to the common meaning of the term (For example, the tax court often refers to common definitions in the Merriam Webster dictionary).

I reviewed several dictionaries and I couldn’t find one definition that even came close to defining the term “home” as a place of business.

What makes this judicial farce even worse is that taxpayers can easily plan to avoid the rule.  For example, the analysis in the Jordan case would change dramatically if the taxpayer had a “home office” in his personal residence in Minnesota.  In that case he may have been able to successfully argue that his “home” really was in Minnesota, where he lived, becuase his business was also there - especially if he kept in contact with his “home office” via the internet and by making regular visits to the “home office.”  Sound absurd, well, the IRS supports the position (see Rev. Rul. 99-7).

It is this type of issue that wastes taxpayer time and government resources.  Congress should define the term “home,” the IRS should abandon its absurd definition, and/or the courts should be able to explain what the term “home” means.

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