The deductibility of traveling expenses for foreign nationals on U.S. internships.

• Author: Burbach, Julie

A foreign national on a U.S. internship may deduct away- from-home expenses even though he was previously a student and did not work for the foreign employer.

If the internship is properly planned, a foreign national on a U.S. internship is eligible to deduct traveling expenses. Even if the individual was previously a student and did not perform services for the foreign company before taking the U.S. internship, it appears that the internship can be structured so as to permit traveling expense deductions within the strictures of Flowers, 326 US 456 (1946), and Hantzis, 638 F2d 248,256 (1st Cir. 1981). The intern should be recruited by the foreign employer and then sent to the U.S. on the internship. The U.S. company should not recruit the intern directly.

The Hantzis decision primarily relied on Flowers, which stated that "the exigencies of business rather than the personal conveniences and necessities of the traveler must be the motivating factors" in determining a taxpayer's home. Mrs. Hantzis maintained her usual residence in Boston; however, she had no business relationship to Boston. She was unable to find summer employment in Boston and on her own found employment in New York. She offered no evidence of a business connection to Boston, and her employer was in no way involved in the travel between, or maintenance of, her dual residence. Mrs. Hantzis argued, pursuant to a doctrine supposedly enunciated by the Supreme Court in Peurifoy, 358 US 59 (1958), that she was excepted from the business exigencies requirement due to the temporary nature of her assignment and that she should be eligible to deduct the away-from-home expenses she incurred in New York. The court disagreed, citing the temporary employment doctrine noted in Frederick, 603 F2d 1292, 1294-1295 (8th Cir. 1979):

Where a taxpayer reasonably expects to be employed in a location for a substantial or indefinite period of time, the reasonable inference is that his choice of a residence is l a personal decision, unrelated to any business necessity. Thus, it is irrelevant how far he travels to work. The normal expectation, however, is that the taxpayer will choose to live near his place of employment. Consequently, when a taxpayer reasonable [sic] expects to be employed in a location for only a short or temporary period of time and travels a considerable distance to the location from his residence, it is unreasonable to assume that his choice of a residence is dictated by...