Rules governing lodging away from home will be liberalized.

• Author: Fiore, Nicholas J.

The IRS and Treasury intend to amend regulations under Sec. 262, relating to the deductibility of lodging expenses.

Background

Sec. 162(a) allows as a deduction all the ordinary and necessary business expenses paid or incurred during the tax year in carrying on any trade or business. Sec. 162(a)(2) provides that expenses deductible under Sec. 162(a) include traveling expenses (including lodging expenses not lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.

Sec. 262(a) provides generally that no deduction is allowed for personal, living or family expenses. Regs. Sec. 1.262-1(b)(5) provides that the costs of a taxpayer's lodging not incurred in traveling away from home are personal expenses and not deductible, unless they qualify as deductible moving expenses under Sec. 217.

Under Regs. Sec. 1.132-5(a), the value of a working-condition fringe benefit is not included in an employee's gross income. A working-condition fringe benefit is any property or service provided to an employee to the extent that, if the employee paid for the property or service, the amount would be allowable as a deduction under Sec. 162 or 167.

Interim Guidance

The Service and Treasury expect to amend Regs. Sec. 1.262-1(b)(5) to provide that the costs of a taxpayer's lodging not incurred in traveling away from home are personal expenses...