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Tax Court Denies Attorney's Deductions for Lodging and Travel Expenses

(Parker Tax Publishing February 2021)

The Tax Court held that an attorney who split his practice between Minnesota and the Washington, D.C., area was not entitled to deduct his lodging expenses while he was in Washington, D.C, because, considering the amount of time he spent in Washington, D.C., and the amount of income he earned there as opposed to Minnesota, his tax home was in Washington, D.C., and he was therefore not away from home while in Washington, D.C. The Tax Court also upheld the denial of the taxpayer's claimed deduction for other expenses after finding that he failed to substantiate his transportation expenses as required under Code Sec. 274(d) and did not establish that the other expenses were ordinary and necessary business expenses rather than personal expenses. Soboyede v. Comm'r, T.C. Summary 2021-3.


Akeem Soboyede is an immigration attorney and is licensed to practice in both Minnesota and Washington, D.C. During 2015, Soboyede maintained solo law practices in Minnesota and in the Washington, D.C., area. Aside from a 54-day trip to Nigeria, Soboyede divided his time in 2015 between these two locations. Soboyede also undertook document review work to financially sustain himself during 2015. In 2015, he received $46,130 in wages from multiple companies for document review work. Of that amount, $38,548 was from work performed in the Washington, D.C., area and $7,582 was from work performed in Minnesota.

Soboyede filed his 2015 Form 1040 selecting married filing separately status. He included with the Form 1040 a Schedule C reporting income and expenses from his law practice. On Schedule C, he reported gross income of $10,650 and total business expenses of $26,816, which produced a net loss of $16,166. The IRS audited Soboyede's return and determined that he either failed to substantiate or was not otherwise entitled to deduct many of the expenses reported on the Schedule C. The IRS sent Soboyede a notice of deficiency disallowing expenses including $8,400 for hotel stays in Maryland to visit a client and transportation-related expenses, including toll fees, parking expenses, and car and truck expenses. Soboyede took his case to the Tax Court.

Under Code Sec. 162(a), a taxpayer may generally deduct ordinary and necessary expenses paid or incurred during the tax year in carrying on a trade or business. Code Sec. 262(a) disallows deductions for personal, living, or family expenses and Reg. Sec. 1.162-2(e) disallows a deduction for commuting expenses. The taxpayer bears the burden of substantiating deductions by keeping and producing records sufficient to enable the IRS to determine the correct tax liability. For travel-related expenses, Code Sec. 162(a)(2) provides that a taxpayer must also establish that (1) the expense is reasonable and not lavish or extravagant under the circumstances; (2) the expense is incurred while away from home; and (3) the expense is incurred in the pursuit of a trade or business. Under Code Sec. 274(d), the taxpayer must establish through adequate records or other evidence (1) the amount of the travel expense; (2) the time and place of travel; and (3) the business purpose of the travel expense.

A taxpayer's "tax home" for purposes of Code Sec. 162(a)(2) generally means the vicinity of the taxpayer's principal place of employment or business and not where his or her personal residence is located. In determining where a taxpayer's tax home is located, the Tax Court considers (1) where the taxpayer spent more of his or her time; (2) where he or she engaged in greater business activity; and (3) where he or she derived a greater proportion of income. Under Norwood v. Comm'r, 66 T.C. 467 (1976), a narrow exception to the tax home rules may nevertheless exist where the taxpayer's place of business or employment in a particular location is temporary, i.e., that it can be expected to last only for a short period of time. However, this exception does not apply where a taxpayer's place of business or employment at a location separate from his or her principal place of business is indefinite or indeterminate in duration as opposed to temporary.


The Tax Court ruled in the IRS's favor and upheld the denial of Soboyede's Maryland hotel expenses after finding that Soboyede did not meet the away-from-home standard under Code Sec. 162(a)(2) because both Minnesota and Maryland represented his tax home in 2015. The court found that Soboyede spent 161 days in the Washington, D.C., area, 54 nonworking days in Nigeria, and at least 115 days in Minnesota. The court said that, even if Soboyede spent the remaining 35 unaccounted for days in Minnesota, he still physically spent more than 50 percent of his total working days in the Washington, D.C. area in 2015. The court further found that Soboyede earned a greater portion of his total income in the Washington, D.C., area during 2015. In the court's view, the Norwood exception for temporary business or employment did not apply because Soboyede failed to establish that his presence in the Washington, D.C., area was temporary as he was not in the area for a set or limited period but was instead indefinitely working there in furtherance of his Washington, D.C, immigration practice. Thus, the court concluded that Soboyede was not away from home during 2015 and therefore could not deduct his Maryland hotel expenses.

The Tax Court also held that the IRS properly disallowed Soboyede's travel expenses because, to the extent they were Code Sec. 162(a)(2) travel expenses, Soboyede failed to properly substantiate them under Code Sec. 274(d) and, to the extent the expenses were not Code Sec. 162(a)(2) travel expenses, he similarly failed to establish how those items were ordinary and necessary business expenses as opposed to nondeductible personal expenses or commuter expenses. The court found that Soboyede did not adequately substantiate the remaining disputed expenses for internet and telephone services, Minnesota office rent, paper, stationery and ink, and continuing legal education classes. The court noted that Soboyede admitted he used the internet and telephone services for both business and personal reasons and found that he failed to show the precise expenditures for business as opposed to personal use.

For a discussion of the rules for deducting travel expenses, see Parker Tax ¶91,105. For a discussion of the substantiation requirements for travel expenses, see Parker Tax ¶91,130.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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