Tax Court Limits Claimed Deduction for Moving Expenses

Nancy M. Gilmore and Woodrow Pengelly (specially recognized), for respondent.

Petitioner moved his household belongings in his pickup truck. He transported his personal belongings, vehicles, etc., by making 20 round trips with his truck. During each trip he placed the household belongings in a storage facility in the vicinity of his new job. The facility charged petitioner $178 per month, and he stored his belongings for nine months during 2012.

During four of the round trips to the vicinity of his new job, petitioner rented a trailer to move larger items, including vehicles. The trailer rental expense was $250 on each occasion. Before being able to use his new residence, petitioner rented a hotel room for $139 per night for two nights.

On his 2012 income tax return petitioner deducted $29,527 for unreimbursed moving expenses. He used tax preparation software to prepare his return and did not understand how the $29,527 was computed. Petitioner obtained three estimates of the cost to pack and move his household goods. The estimates were from $22,000 to approximately $30,000. Respondent, in a notice of deficiency, determined that petitioner was not entitled to deduct any part of the $29,527.

The remaining question for our consideration is the amount of the deduction for moving expenses to which petitioner is entitled. Moving expenses are deductible only if they are reasonable under the circumstances of the particular move. Sec. 1.217-2(b)(2)(i), Income Tax Regs.

Requirements for the deduction for moving household goods are, in pertinent part, specified in section 1.217-2(b)(3), Income Tax Regs., as follows:

Petitioner drove 20 round trips for a total of 7,280 miles (182 x 2 x 20 = 7,280). At 23 cents per mile the cost of moving his personal property is $1,674.40. Petitioner also incurred several months of storage fees for his personal property; however, under section 1.217-2(b)(3), Income Tax Regs., he is entitled only to the cost for one month or $178, in accord with the 30-day limitation in that regulation. Petitioner also rented a trailer on four occasions to move large items, including motor vehicles, at a cost of $250 per rental or a total of $1,000.

Respondent did not question the reasonableness or number of trips that petitioner made to move his property. Instead, respondent argued that under section 1.217-2(b)(4), Income Tax Regs., petitioner is entitled to deduct only the cost of one trip to his new residence. That regulation, in pertinent part, provides as follows:

Respondent's interpretation would ignore the actual cost incurred by individuals who move their own personal property and would effectively limit the purpose of section 1.217-2(b)(3), Income Tax Regs., to instances where taxpayers paid to have their personal property commercially moved or moved by someone not a member of the family.

The final of the 20 trips to the new residence must be counted as petitioner's travel to his new residence, and accordingly he would not be entitled to deduct the cost of a round trip on that occasion. The effect of the one-trip rule would be to reduce petitioner's costs by $41.86 (182 x .23 = 41.86) so that his total mileage expense deduction would be $1,632.54 ($1,674.40 - 41.86).

Finally, petitioner incurred $278 for lodging (two nights at $139 each) while waiting to gain access to his new residence. Expenses incurred following the date of arrival at and while waiting for access to the new residence are not included among those travel expenses delineated as allowable travel expense in these circumstances. Sec. 217(b)(1)(B); sec. 1.217-2(b)(4), Income Tax Regs.

In summary, we hold that petitioner is entitled to a $2,810.54 moving expense deduction under section 217, as follows:

 Item                                        Amount

Decision will be entered under Rule 155.