                      115 T.C. No. 16



                UNITED STATES TAX COURT



     MARIN I. AND ANITA J. JOHNSON, Petitioners v.
      COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 5114-98.                 Filed September 15, 2000.



     P is a merchant seaman who captains a vessel that
sails worldwide carrying equipment of the U.S.
military. The vessel sails infrequently in the general
vicinity of P’s residence, which also is not near the
office of P’s employer. P’s employer furnishes him
with lodging and meals without charge while he works on
the vessel, but P pays for his other (incidental)
travel expenses. P reported his incidental travel
expenses as miscellaneous itemized deductions for 1994
and 1996, ascertaining the amounts of those deductions
by using the full Federal per diem rates for meal and
incidental expense (M&IE rates). The M&IE rates are
referenced in Rev. Proc. 96-28, 1996-1 C.B. 686, and
its progenitors, which provide that an employee, in
lieu of substantiating his or her actual travel
expenses, may use the M&IE rates to compute the cost of
meal and incidental expenses paid while working away
from home. See, e.g., id. sec. 4.03, 1996-1 C.B. at
688. P has no receipts for his incidental travel
expenses.
                                 - 2 -


          Held: P’s tax home is the situs of his residence.
          Held, further, P’s testimony, by itself, supports
     a finding that P paid incidental travel expenses while
     employed away from his tax home.
          Held, further, P’s use of the M&IE rates is
     limited to the portions thereof that are attributable
     to incidental expense.



     Steven R. Stolar and Kristina S. Keller, for petitioners.

     Ric D. Hulshoff, for respondent.



     LARO, Judge:   Respondent determined deficiencies of $945 and

$1,022 in petitioners’ 1994 and 1996 Federal income taxes,

respectively.   The deficiencies stem from respondent’s

disallowance of $3,784 and $3,654 that Marin I. Johnson

(petitioner) claimed for the respective years as miscellaneous

itemized deductions for travel expenses connected to his

employment as a merchant seaman.    Petitioner ascertained the

amount of those deductions by using the full Federal per diem

rates for meal and incidental expense (M&IE rates) referenced in

Rev. Proc. 96-28, 1996-1 C.B. 686, and its progenitors.    See,

e.g., id. sec. 4.03, 1996-1 C.B. at 688.    Petitioner’s actual

expenses consisted solely of incidental expenses; while he was at

work, his employer furnished him with lodging and meals at no

charge.

     We must decide whether petitioner may deduct the claimed

amounts.   We hold he may not.   We hold that petitioner’s use of
                                - 3 -


the M&IE rates is limited to the incidental expense portions of

those rates and that his deductions must be determined

accordingly.    Unless otherwise indicated, section references are

to the Internal Revenue Code, and Rule references are to the Tax

Court Rules of Practice and Procedure.

                          FINDINGS OF FACT

     Most facts were stipulated.    The parties’ stipulations of

fact and the exhibits submitted therewith are incorporated herein

by this reference.    The stipulations of fact are found

accordingly.    Petitioners resided in Freeland, Washington

(Freeland), when we filed their petition.    Freeland is a

community on Whidbey Island, Washington, located in the Puget

Sound approximately 70 miles east of Port Angeles, Washington,

and approximately 75 miles north of Tacoma, Washington.1

     Petitioners are husband and wife.    They and their daughter

resided during the subject years in a house (personal residence)

that petitioners owned in Freeland.     During 1994, petitioner paid

$12,640 of mortgage interest and $4,412 of real estate taxes on

the personal residence.    He paid $11,002 of mortgage interest and

$4,799 of real estate taxes on the personal residence during

1996.




     1
         We have taken judicial notice of this fact.
                               - 4 -


     Petitioners’ primary source of income is petitioner’s wages

from Crowley American Transport, Inc. (Crowley), the primary

office of which is in Jacksonville, Florida, and from the

American Maritime Officers Vacation Plan.2   Crowley employs

petitioner as the captain of its vessel the M/V American Falcon

(Falcon).   Crowley primarily charters the Falcon to the U.S.

military to transport military vehicles and other military

equipment worldwide.   Petitioner’s work requires that he work

continuously on or around the Falcon for long periods of time and

that he then vacation for approximately 2 months.    Petitioner and

his crew generally fly to and from the situs of the Falcon at the

beginning and end of their work schedule.

     During 1994, petitioner worked from April 22 to July 10 and

from September 7 to December 8, for a total of 173 days.    During

1996, petitioner worked from January 1 to February 3 and from

June 26 to December 13, for a total of 205 days.    Petitioner’s

duties included captaining the sailing of the Falcon from one

city to another and performing any assignment required by his

employer while the Falcon was docked at port.




     2
       On the basis of the record, we infer that Crowley pays
wages to petitioner while he works for Crowley and that the
American Maritime Officers Vacation Plan pays wages to petitioner
while he is on vacation.
                                - 5 -


     Petitioner sailed the Falcon to and from the cities set

forth in the schedule below.3   The Falcon was generally at sea

between each departure and immediately following arrival date set

forth in the schedule, and the Falcon was generally at port on

and between each arrival and immediately following departure

date.

         Date       Status              Location

   1994

     Apr. 22        Joined      Gulfport, Miss., U.S.A.
     Apr. 22        Departed    Gulfport, Miss., U.S.A.
     Apr. 26        Arrived     Bayonne, N.J., U.S.A.
     Apr. 27        Departed    Bayonne, N.J., U.S.A.
     May 6          Arrived     Rotterdam, The Neth.
     May 9          Departed    Rotterdam, The Neth.
     May 19         Arrived     Bayonne, N.J., U.S.A.
     May 21         Departed    Bayonne, N.J., U.S.A.
     May 23         Arrived     Jacksonville, Fla., U.S.A.
     May 24         Departed    Jacksonville, Fla., U.S.A.
     June 5         Arrived     Hommelvik, Nor.
     June 7         Departed    Hommelvik, Nor.
     June 10        Arrived     Rotterdam, The Neth.
     June 11        Departed    Rotterdam, The Neth.
     June 19        Arrived     Bayonne, N.J., U.S.A.
     June 20        Departed    Bayonne, N.J., U.S.A.
     June 29        Arrived     Rotterdam, The Neth.
     June 29        Departed    Rotterdam, The Neth.
     June 30        Arrived     Bremerhaven, F.R.G.


     3
       The word “Departed” connotes that the Falcon left the
corresponding city on the corresponding date. The word “Arrived”
connotes that the Falcon arrived in the corresponding city on the
corresponding date. The word “Joined” connotes that petitioner
resumed working on the Falcon on the corresponding date and in
the corresponding city following his vacation. The word “Left”
connotes that petitioner ceased working on the Falcon on the
corresponding date and in the corresponding city to begin his
vacation.
                         - 6 -


  July 1      Departed   Bremerhaven, F.R.G.
                          1
  July 10     Arrived
                          1
  July 10     Left

  Sept. 7     Joined     Beaumont, Tex., U.S.A.
  Sept. 7     Departed   Beaumont, Tex., U.S.A.
  Sept. 9     Arrived    Gulfport, Miss., U.S.A.
  Sept. 12    Departed   Gulfport, Miss., U.S.A.
  Sept. 14    Arrived    Guantanamo, Cuba
  Sept. 17    Departed   Guantanamo, Cuba
  Sept. 20    Arrived    Bayonne, N.J., U.S.A.
  Sept. 21    Departed   Bayonne, N.J., U.S.A.
  Sept. 25    Arrived    Port-au-prince, Haiti
  Sept. 26    Departed   Port-au-prince, Haiti
  Oct. 7      Arrived    Bremerhaven, F.R.G.
  Oct. 9      Departed   Bremerhaven, F.R.G.
  Oct. 18     Arrived    Port Said, Egypt
  Oct. 19     Departed   Port Said, Egypt
  Oct. 27     Arrived    Shubai
  Oct. 29     Departed   Shubai
  Oct. 30     Arrived    Dammam, Saudi Arabia
  Oct. 30     Departed   Dammam, Saudi Arabia
  Oct. 30     Arrived    Bahr.
  Nov. 1      Departed   Bahr.
  Nov. 2      Arrived    Dubai, U.A.E.
  Nov. 3      Departed   Dubai, U.A.E.
  Nov. 9      Arrived    Port Suez, Egypt
  Nov. 10     Departed   Port Suez, Egypt
  Nov. 14     Arrived    Tekirdag, Turk.
  Nov. 14     Departed   Tekirdag, Turk.
  Nov. 19     Arrived    Rota, Spain
  Nov. 20     Departed   Rota, Spain
  Dec. 2      Arrived    Port-au-prince, Haiti
  Dec. 4      Departed   Port-au-prince, Haiti
  Dec. 8      Arrived    Beaumont, Tex., U.S.A.
  Dec. 8      Left       Beaumont, Tex., U.S.A.

1996

  Jan.   1    Joined     Dubai, U.A.E.
  Jan.   7    Departed   Dubai, U.A.E.
  Jan.   14   Arrived    Port Suez, Egypt
  Jan.   15   Departed   Port Suez, Egypt
  Jan.   16   Arrived    Ashdod, Isr.
  Jan.   17   Departed   Ashdod, Isr.
  Jan.   21   Arrived    Gibraltar, Gib.
  Jan.   23   Departed   Gibraltar, Gib.
                      - 7 -


Feb. 2     Arrived    Wilmington, N.C., U.S.A.
Feb. 3     Left       Wilmington, N.C., U.S.A.

June 26    Joined     Aqaba Port, Jordan
June 28    Departed   Aqaba Port, Jordan
June 28    Arrived    Port Suez, Egypt
June 29    Departed   Port Suez, Egypt
June 30    Arrived    Iskendren, Turk.
July 2     Departed   Iskendren, Turk.
July 3     Arrived    Port Said, Egypt
July 5     Departed   Port Said Egypt
July 6     Arrived    Aqaba Port, Jordan
July 8     Departed   Aqaba Port, Jordan
July 13    Arrived    Raysut, Oman
July 14    Departed   Raysut, Oman
July 18    Arrived    Port Suez, Egypt
July 19    Departed   Port Suez, Egypt
July 28    Arrived    Bremerhaven, F.R.G.
July 30    Departed   Bremerhaven, F.R.G.
Aug. 2     Arrived    Muuga, Est.
Aug. 3     Departed   Muuga, Est.
Aug. 3     Arrived    Riga, Russ.
Aug. 4     Departed   Riga, Russ.
Aug. 5     Arrived    Klaipeda, Russ.
Aug. 5     Departed   Klaipeda, Russ.
Aug. 8     Arrived    Antwerp, Belg.
Aug. 9     Departed   Antwerp, Belg.
Aug. 17    Arrived    Port Said, Egypt
Aug. 18    Departed   PortSaid, Egypt
Sept. 5    Arrived    Pusan, S. Korea
Sept. 11   Departed   Pusan, S. Korea
Sept. 12   Arrived    Pohang, S. Korea
Sept. 13   Departed   Pohang, S. Korea
Sept. 15   Arrived    Naha, Japan
Sept. 16   Departed   Naha, Japan
Sept. 18   Arrived    Pusan, S. Korea
Sept. 21   Departed   Pusan, S. Korea
Sept. 23   Arrived    Okinawa, Japan
Sept. 28   Departed   Okinawa, Japan
Oct. 12    Arrived    Concord, Cal., U.S.A.
Oct. 15    Departed   Concord, Cal., U.S.A.
Oct. 16    Arrived    Oakland, Cal., U.S.A.
Oct. 19    Departed   Oakland, Cal., U.S.A.
Oct. 20    Arrived    Port Angeles, Wash., U.S.A.
Oct. 20    Departed   Port Angeles, Wash., U.S.A.
Oct. 21    Arrived    Tacoma, Wash., U.S.A.
Oct. 23    Departed   Tacoma, Wash., U.S.A.
                               - 8 -


     Oct.   26      Arrived    Port Hueneme, Cal., U.S.A.
     Oct.   27      Departed   Port Hueneme, Cal., U.S.A.
     Nov.   1       Arrived    Pearl Harbor, Haw., U.S.A.
     Nov.   2       Departed   Pearl Harbor, Haw., U.S.A.
     Nov.   11      Arrived    Guam
     Nov.   15      Departed   Guam
     Nov.   18      Arrived    Naha, Japan
     Nov.   19      Departed   Naha, Japan
     Nov.   21      Arrived    Pusan, S. Korea
     Nov.   23      Departed   Pusan, S. Korea
     Nov.   24      Arrived    Naha, Japan
     Nov.   28      Departed   Naha, Japan
     Nov.   30      Arrived    Yokohama, Japan
     Dec.   2       Departed   Yokohoma, Japan
     Dec.   13      Arrived    Port Angeles, Wash., U.S.A.
     Dec.   13      Left       Port Angeles, Wash., U.S.A.
            1
            The record does not indicate the port in which the
     Falcon arrived on July 10, 1994, nor the city from which
     petitioner left on that date to begin his vacation.

     While petitioner was at work, Crowley provided him with

lodging and meals at no charge.   Petitioner had to and did pay

his other expenses, and the Falcon had a small store on board

from which crew members were allowed to purchase items such as

hygiene products, foul weather gear, and bottled water.

Petitioner neither was entitled to nor received reimbursement for

any of his expenses.   While he was at work, petitioner purchased

incidental travel items such as hygiene products and bottled

water, and he paid for laundry, dry cleaning, and grooming

services and the cost of transportation from the Falcon to the

location of the service providers.     Petitioner also was required

to and did purchase clothing and other necessities to adapt to
                               - 9 -


the climates for which he was required to sail without prior

notice.

      On his 1994 Federal income tax return, as amended,

petitioner claimed a miscellaneous itemized deduction of $3,784

for meals and entertainment related to his employment by Crowley;

the claimed amount took into account the 50-percent limitation

for meals and entertainment provided by section 274(n).

Petitioner reported $5,712 of miscellaneous itemized deductions

for 1994, claiming that he was entitled to deduct $3,377 of that

amount after taking into account the 2-percent floor of section

67.   Petitioner has no receipts to support the claimed $3,784

deduction.   Petitioner used the per diem substantiation method of

the applicable revenue procedures and ascertained the amount of

that deduction by using the full M&IE rate for each city to which

he traveled.   The $3,784 deduction related solely to the

incidental expenses which petitioner paid during 1994 while

working on the Falcon.

      On his 1996 Federal income tax return, petitioner claimed a

miscellaneous itemized deduction of $4,912 for business expenses

other than meals and entertainment and a $3,654 miscellaneous

itemized deduction for meals and entertainment; both amounts were

related to his employment by Crowley, and the latter amount took

into account the 50-percent limitation of section 274(n) for

meals and entertainment.   Petitioner reported $10,239 of
                               - 10 -


miscellaneous itemized deductions for 1996, claiming on that

return that he was entitled to deduct $7,811 of that amount after

taking into account the 2-percent floor of section 67.

Petitioner has no receipts to support the claimed deduction of

$3,654.   Petitioner used the per diem substantiation method of

the applicable revenue procedures and ascertained the amount of

that deduction by using the full M&IE rate for each city to which

he traveled.    The $3,654 deduction related solely to the

incidental expenses which petitioner paid during 1996 while

working on the Falcon.

     Respondent determined that petitioner was not entitled to

deduct the $3,784 and $3,654 amounts claimed for 1994 and 1996,

respectively.

                               OPINION

     We must decide whether petitioner may deduct the cost of the

incidental travel items which he purchased during the subject

years while working away from his personal residence.    Petitioner

argues he may.    Petitioner asserts that he incurred the costs

while working away from home on business.    Petitioner asserts

that the applicable revenue procedures mentioned herein dispense

with the need to substantiate the amounts of those costs in order

to deduct them.    Respondent argues that petitioner may not deduct

those costs.    Respondent asserts primarily that petitioner had no

tax home.   Respondent asserts secondly that petitioner did not
                               - 11 -


prove that he actually incurred the claimed expenses; respondent

asserts that petitioner’s testimony standing alone is

insufficient proof for this purpose.    Respondent asserts thirdly

that petitioner may not use the subject revenue procedures to

ascertain the amounts of his deductions because, respondent

asserts, those revenue procedures do not apply when only

incidental expenses are incurred.

     We agree with petitioner that he is entitled to the claimed

deductions but disagree with him as to the amounts of those

deductions.   We hold that petitioner’s deductions are limited to

the incidental expense portions of the applicable M&IE rates.       We

begin our analysis with the relevant statutory provisions.     An

individual may deduct all ordinary and necessary expenses paid or

incurred during the taxable year in carrying on a trade or

business.   See sec. 162(a).   Services performed by an employee

constitute a trade or business for this purpose, see O'Malley v.

Commissioner, 91 T.C. 352, 363-364 (1988), and ordinary and

necessary expenses generally include amounts which an employee

pays while traveling away from home in connection with his or her

employment, see sec. 162(a)(2).    Section 162 does not, however,

allow a taxpayer to deduct travel expenses attributable to

personal, living, or family expenses.    See sec. 262.   Nor does

section 162 allow a taxpayer to deduct travel expenses absent

either compliance with the substantiation requirements of section
                              - 12 -


274(d) or the fulfillment of criteria set forth by the

Commissioner as to expenditures less than a stated amount (de

minimis expenses).   See sec. 274(d); see also sec. 1.274-5T(j),

Temporary Income Tax Regs., 50 Fed. Reg. 46032 (Nov. 6, 1985)

(authorizes the Commissioner to provide rules under which

taxpayers may deduct a set amount in lieu of substantiation for

meals while traveling away from home).

     The Commissioner first set forth the criteria for de minimis

expenditures in Rev. Proc. 89-67, 1989-2 C.B. 795.   There, the

Commissioner provided that “the amount of ordinary and necessary

business expenses of an employee for lodging, meal, and/or

incidental expenses incurred while traveling away from home will

be deemed substantiated * * * when * * * [the employer] provides

a per diem allowance” to the employee equal to the applicable

M&IE rate.4   Id. secs. 1, 3, 1989-2 C.B. at 795, 796.   The


     4
       Government employees are generally entitled to a per diem
allowance for official travel away from their official stations,
as payment for lodging, meals, and related incidental expenses.
See 41 C.F.R. secs. 301-1.2, 301-7.1 (1994 & 1996). The per diem
allowance, which includes a maximum amount for lodging expenses
and a fixed amount for M&IE, varies depending on the area of
travel. See 41 C.F.R. sec. 301-7.3 (1994 & 1996). The
Administrator of General Services sets the per diem allowance for
travel to areas in the continental United States (CONUS rates).
The Department of Defense sets the per diem allowance for travel
to nonforeign areas outside the continental United States. The
Department of State sets the per diem allowance for travel to
foreign areas. See id. The list of the amounts of these per
diem allowances, including the breakdown of the portions
attributable to lodging and M&IE, is referenced in 41 C.F.R. sec.
                                                   (continued...)
                              - 13 -


Commissioner provided that “The term ‘incidental expenses’

includes, but is not limited to, expenses for laundry, cleaning

and pressing of clothing, and fees and tips for services, such as

for waiters and baggage handlers.”     Id. sec. 3.02(4), 1989-2 C.B.

at 797.   The Commissioner provided that “The term ‘incidental

expenses’ does not include taxicab fares or the costs of

telegrams or telephone calls.”   Id.

     Rev. Proc. 89-67, supra, was silent as to the situation

where an employee without a travel allowance incurred traveling

expenses while employed away from home.    The Commissioner first

addressed that subject in Rev. Proc. 90-60, 1990-2 C.B. 651,

which provided rules on the subject matter of the predecessor

revenue procedure as well as rules addressing the situation where

an employee not subject to a travel allowance incurred traveling

expenses while employed away from home.    See id. sec. 1, 1990-2

C.B. at 651.   Section 1 of Rev. Proc. 90-60, supra, provided

generally that an employee, in lieu of substantiating his or her

actual expenses, could “use [the applicable M&IE rate or rates]

in computing the deductible costs of business meal and incidental

expenses paid or incurred while traveling away from home.”    The

other relevant provisions of Rev. Proc. 90-60, 1990-2 C.B. at

652-653, 655, provided specifically:


     4
      (...continued)
301-7.3 (1994 & 1996).
                          - 14 -


SEC. 3.   DEFINITIONS

   *        *       *       *       *      *       *

       .02 FEDERAL PER DIEM RATE.

     (1) General rule. The Federal per diem rate is
equal to the sum of the Federal lodging expense rate
and the Federal meal and incidental expense (M&IE) rate
for the locality of travel. The Federal per diem rate,
the Federal lodging expense rate, and the Federal M&IE
rate for a locality in the continental United States
(“CONUS”) are set forth in Appendix A of 41 C.F.R.,
Chapter 301. See 41 C.F.R. Part 301-7 (1990) for
specific rules regarding these Federal rates. The
Federal per diem rates for nonforeign localities
outside the continental United States (“OCONUS”)
(including Alaska, Hawaii, Puerto Rico, the Northern
Mariana Islands, and the possessions of the United
States) are established by the Secretary of Defense and
listed in Civilian Personnel Per Diem Bulletins
published periodically in the Federal Register. See,
e.g., Civilian Personnel Per Diem Bulletin Number 153,
55 Fed. Reg. 50,864 (December 11, 1990). The Federal
per diem rates for foreign OCONUS localities are
established by the Secretary of State and published,
together with the rates for nonforeign OCONUS
localities, in the Per Diem Supplement to the
Standardized Regulations (Government Civilians, Foreign
Areas). See, e.g., Maximum Travel Per Diem Allowances
for Foreign Areas, PD Supplement 319, issued December
1, 1990.

     (2) Outside CONUS. For OCONUS travel away from
home, if a separately identified Federal lodging
expense rate or Federal M&IE rate does not exist for
the OCONUS locality of travel, 60 percent of the
applicable Federal per diem rate for that locality of
travel is treated as equivalent to the Federal lodging
expense rate for that locality and 40 percent of the
applicable Federal per diem rate for that locality of
travel is treated as equivalent to the Federal M&IE
rate for that locality. If a separately identified
Federal lodging expense rate or Federal M&IE rate is
adopted for an OCONUS locality of travel for which no
such separately identified rate previously existed,
                         - 15 -


that rate shall apply to all travel within such
locality beginning 30 days after its publication.

     (3) Locality of travel. The term “locality of
travel” means the locality where an employee traveling
away from home in connection with the performance of
services as an employee of the employer stops for sleep
or rest.

     (4) Incidental expenses. The term “incidental
expenses” includes, but is not limited to, expenses for
laundry, cleaning and pressing of clothing, and fees
and tips for services, such as for waiters and baggage
handlers. The term “incidental expenses” does not
include taxicab fares or the costs of telegrams or
telephone calls.

SEC. 4.   PER DIEM SUBSTANTIATION METHOD

   *        *       *       *       *      *        *

     .03 OPTIONAL METHOD FOR MEALS ONLY DEDUCTION. In
lieu of using actual expenses, employees and self-
employed individuals, in computing the amount allowable
as a deduction for ordinary and necessary meal and
incidental expenses paid or incurred for travel away
from home, may use an amount computed at the Federal
M&IE rate for the locality of travel for each calendar
day (or part thereof * * *) the employee or self-
employed individual is away from home. Such amount
will be deemed substantiated for purposes of paragraphs
(b)(2) (travel away from home) and (c) of section
1.274-5T of the temporary regulations, provided the
employee or self-employed individual substantiates the
elements of time, place, and business purpose of the
travel expenses in accordance with those regulations.

   *        *       *       *       *      *        *

SEC. 6. LIMITATIONS AND SPECIAL RULES

     .01 In general. The Federal per diem rate, the
Federal lodging expense rate, and the Federal M&IE rate
described in section 3.02 for the locality of travel
will be applied in the same manner as applied under the
Federal Travel Regulations, 41 C.F.R. Part 301-7
                             - 16 -


     (1990), except as provided in sections 6.02 through
     6.04.

          .02 Federal per diem or lodging expense rate. A
     receipt for lodging expenses is not required in order
     to apply the Federal per diem rate or the Federal
     lodging expense rate for the locality of travel.

          .03 Federal per diem or M&IE rate. A payor is
     not required to reduce the Federal per diem rate or the
     Federal M&IE rate for the locality of travel for meals
     provided in kind, provided the payor has a reasonable
     belief that meal and incidental expenses were or will
     be incurred by the employee. * * *

     The Commissioner restated the rules of Rev. Proc. 90-60,

supra, almost verbatim in subsequent revenue procedures, each of

which superseded the prior revenue procedure on the subject.    See

Rev. Proc. 92-17, 1992-1 C.B. 679 (supersedes Rev. Proc. 90-60,

supra, for meal and incidental expenses paid by an employee for

travel while away from home after February 28, 1992); Rev. Proc.

93-21, 1993-1 C.B. 529 (supersedes Rev. Proc. 92-17, supra, for

meal and incidental expenses paid by an employee for travel while

away from home after March 11, 1993); Rev. Proc. 93-50, 1993-2

C.B. 586 (supersedes Rev. Proc. 93-21, supra, for meal and

incidental expenses paid by an employee for travel while away

from home after December 31, 1993); Rev. Proc. 94-77, 1994-2 C.B.

825 (supersedes Rev. Proc. 93-50, supra, for meal and incidental

expenses paid by an employee for travel while away from home

after December 31, 1994); Rev. Proc. 96-28, 1996-1 C.B. 686

(supersedes Rev. Proc. 94-77, supra, for meal and incidental
                              - 17 -


expenses paid by an employee for travel while away from home

after March 31, 1996).   Each of these revenue procedures

clarified that the use of the M&IE rates was not mandatory and

that a taxpayer could deduct actual allowable expenses if he or

she had adequate records or other supporting documentation.    See,

e.g., Rev. Proc. 96-28, sec. 1, 1996-1 C.B. at 686; Rev. Proc.

94-77, sec. 1, 1994-2 C.B. at 825.

     Respondent argues primarily that these revenue procedures

have no applicability to this case because, respondent asserts,

petitioner’s employment on the Falcon was not away from home.

Respondent characterizes petitioner as an itinerant, meaning that

he had no tax home.   Respondent asserts that a taxpayer may have

a tax home only if he or she incurs duplicative living expenses.

Respondent asserts that petitioner is without a tax home because

he did not incur duplicative living expenses since his employer

furnished him with meals and lodging without charge.   Respondent

asserts that petitioner’s claimed incidental expenses were not

duplicative of any expense that he actually incurred as to his

personal residence.   Respondent relies primarily on Henderson v.

Commissioner, 143 F.3d 497 (9th Cir. 1998), affg. T.C. Memo.

1995-559, and Rev. Rul. 73-529, 1973-2 C.B. 37.

     We disagree with respondent’s assertion that petitioner had

no tax home.   This Court’s jurisprudence holds that an

individual’s tax home is generally the location of his or her
                              - 18 -


principal place of employment.   See Daly v. Commissioner, 72 T.C.

190 (1979); Kroll v. Commissioner, 49 T.C. 557, 561-562 (1968);

cf. Commissioner v. Flowers, 326 U.S. 812 (1946).   If an

individual does not have a principal place of employment, we

generally deem the situs of the individual’s permanent residence

to be his or her tax home.   See Rambo v. Commissioner, 69 T.C.

920 (1978); Dean v. Commissioner, 54 T.C. 663 (1970); Leach v.

Commissioner, 12 T.C. 20 (1949).   We consider a person who has

neither a permanent residence nor a principal place of employment

to be an itinerant without a tax home.   See Wirth v.

Commissioner, 61 T.C. 855, 859 (1974); Hicks v. Commissioner, 47

T.C. 71 (1966).

     Petitioner had no principal place of employment.   He did,

however, have a permanent residence; to wit, his personal

residence.   We believe that petitioner’s tax home was the situs

of his personal residence in Freeland, where he resided with his

wife and their daughter.   See Leach v. Commissioner, supra.5

Unlike the taxpayer in Henderson v. Commissioner, supra, who



     5
       In Leach v. Commissioner, 12 T.C. 20 (1949), we held that
the taxpayer’s tax home was the situs of his personal residence,
and we let him deduct the costs which he paid to lodge near some
of his work sites. The taxpayer had no principal place of
employment and resided in his personal residence with his wife
and child. He worked away from that residence for 49 weeks of
the year and could not move his wife and child to the area of any
of his work sites mainly because he was at each of the sites for
a short and indefinite period.
                              - 19 -


lived with his parents practically without charge in the situs

that he argued was his tax home, petitioner was primarily

responsible for maintaining financially his personal residence,

he had an ownership interest in his personal residence, and he

contributed to his household there in a valuable and

indispensable way.   Petitioner also spent a substantial part of

each year at his personal residence.   Whereas the taxpayer in

Henderson v. Commissioner, supra, worked for his employer away

from his claimed tax home approximately 85 percent of the year,

petitioner was required by his employer to be away from his

personal residence only 47.4 percent of 1994 and only 56.4

percent of 1996.

     Petitioner also had a legitimate reason for maintaining his

personal residence in Freeland while traveling throughout the

world with and for his employer.   First, petitioner’s family did

not travel with him while he worked; thus, petitioner was

required to maintain a family residence somewhere.   We refuse to

second guess petitioner’s decision to maintain his family

residence in Freeland, instead of moving his family to the

location of his Florida employer or to one of the many cities to

which he traveled.   Cf. Leach v. Commissioner, supra.   To have a

tax home for purposes of section 162(a), a taxpayer need not
                              - 20 -


maintain a residence in a city in which he or she actually

works.6   See id.

     Second, unlike the taxpayer in Henderson v. Commissioner,

supra, petitioner would have incurred a substantial out-of-pocket

duplication of lodging and meal expenses while he worked but for

the fact that his employer furnished him with those items at no

charge.   Had petitioner’s employer not done so, petitioner would

have incurred the duplicative out-of-pocket expenses which

respondent argues are necessary for a finding of a tax home.

Contrary to respondent’s assertion, we do not believe that a

finding of a tax home for purposes of section 162(a) turns on

whether an employer provides lodging and meals to an employee

without charge as part of the employee’s compensation package.

See Henderson v. Commissioner, supra at 499 (“A taxpayer may [as

opposed to will] have no tax home * * * if he continuously



     6
       As a point of fact, however, petitioner did work near his
personal residence on a few occasions. Respondent points to the
parties’ stipulation that petitioner’s “employer did not require
petitioner Marin Johnson to perform services as a ship master in
the Freeland, Washington area during 1994 or 1996” and concludes
that all of petitioner’s work was far from his personal
residence. We do not read this stipulation as broadly as
respondent. To be sure, petitioner worked near his personal
residence from Oct. 20 through 23, 1996, and on Dec. 13, 1996.
Respondent also places undue weight on the fact that Crowley did
not require that petitioner vacation at his personal residence,
thus leaving petitioner free to vacation elsewhere. The fact
that Crowley did not mandate that petitioner stay at his personal
residence during his vacation carries no weight as to whether he
had a tax home for purposes of sec. 162(a).
                                   - 21 -


travels and thus does not duplicate substantial, continuous

living expenses for a permanent home maintained for some business

reason.”     (Emphasis added.)).    The value of lodging and meals

that an employer furnishes to an employee is an item of income

that must be included in the employee’s gross income but for the

application of an exclusionary provision such as section 119

(meals and lodging furnished for the convenience of the

employer).    We do not believe that a finding of a tax home for

purposes of section 162(a) turns on whether an employee may

exclude the value of employer-provided lodging and meals from his

or her gross income.    An employee who could not exclude the value

of those items from gross income would incur an expense as to

those items, to the extent that his or her personal income tax

was attributable thereto, and that expense would mean that the

employee was paying twice for overlapping lodging and/or meals.

     Petitioner’s work schedule also was generally fixed as to

the number of days that he was required to work and allowed to

vacation.    Thus, unlike the taxpayer in Henderson v.

Commissioner, 143 F.3d 497 (9th Cir. 1998), petitioner would not

have avoided a duplication of living expenses during his vacation

had he established his home at other than his personal residence.

Petitioner received neither meals nor lodging from his employer

while he was on vacation.     Thus, were petitioner to have lived in

other than his personal residence during that time, he would have
                                - 22 -


had to pay for those living quarters and his meals there as well

as the cost of his personal residence and the meals which his

family consumed at the personal residence.    According to

respondent, an employee such as petitioner can never have a tax

home because he continually travels to different cities during

his employment.    We disagree that such continual travel, in and

of itself, serves to disqualify a taxpayer from having a tax home

for purposes of section 162(a).    Regardless of where a taxpayer

performs most of his or her work, the fact that he or she

maintains financially a fixed personal residence generally means

that he or she has a tax home someplace.    See James v. United

States, 308 F.2d 204 (9th Cir. 1962) (a taxpayer's permanent

residence is his or her tax home if the taxpayer has no principal

place of employment, is currently working away from that

residence, and incurs substantial continuing living expenses at

the residence); see also Leach v. Commissioner, 12 T.C. 20

(1949).   Because petitioner incurred throughout the subject years

substantial living expenses in maintaining his personal

residence, his personal residence was his tax home for purposes

of section 162(a).    Cf. Ireland v. Commissioner, T.C. Memo. 1979-

386.

       Respondent’s reliance on Rev. Rul. 73-529, 1973-2 C.B. 37,

is misplaced.     In addition to the fact that revenue rulings are

not binding on this Court, see Sklar, Greenstein & Scheer, P.C.
                               - 23 -


v. Commissioner, 113 T.C. 135, 142 (1999); see also Christensen

v. Harris County, 526 U.S.     ,    , 120 S. Ct. 1655, 1662-1663

(2000) (the interpretation that an agency reaches without formal

notice and comment rulemaking is entitled to “respect” only when

it has the “power to persuade”), that ruling is unpersuasive as

applied to the facts herein.   The ruling applies ostensibly to

outside salesmen, providing examples which distinguish (1)

outside salesmen who are considered to be itinerants because they

do not have a home or regular place of employment from (2)

outside salesmen who may be regarded as having a home to be away

from.   Petitioner is neither an outside salesman nor an

itinerant.   He is a professional seaman who accepted employment

away from his personal residence, most likely because he could

earn his living at his trade more profitably than if he attempted

to do so in the area of his personal residence.   He accepted that

employment with the understanding that he would travel at

designated times to where the Falcon was docked and captain the

Falcon for a fixed time.   Our finding that petitioner has a tax

home regardless of this revenue ruling is further solidified by

noting that respondent does not contest petitioner’s right to

deduct as travel expenses the other reported travel expenses

which he incurred with respect to his employment.

     Nor do we agree with respondent that petitioner has not

established that he paid incidental expenses during his
                              - 24 -


employment.   Petitioner testified credibly that he paid those

expenses, and respondent’s counsel never challenged that

testimony, opting to rest his case without cross-examining

petitioner or without introducing any evidence to attempt to

impeach that testimony.   We disagree with respondent’s assertion

that petitioner must introduce into evidence actual receipts of

his incidental expenditures in order to deduct them.   As we read

Rev. Proc. 96-28, 1996-1 C.B. 686, and its progenitors, one of

the primary purposes of those revenue procedures is to allow

taxpayers to deduct a set amount of travel expenses incurred away

from home in lieu of maintaining written records to substantiate

the actual amount.   See also sec. 1.274-5T(j), Temporary Income

Tax Regs., 50 Fed. Reg. 46032 (Nov. 6, 1985) (“the Commissioner

may establish a method under which a taxpayer may elect to use a

specified amount or amounts for meals while traveling in lieu of

substantiating the actual cost of meals”).   We note, however,

that petitioner has introduced into evidence records which meet

the time, place, and business purpose requirements of sec. 1.274-

5T(b)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,

1985), as to his incidental expenses.   Those records show

clearly:   (1) The dates of petitioner’s departure for and return

from each city that he visited while away from home (the time

requirement), (2) the cities or points of travel (the place

requirement), and (3) the business nexus between his employment
                              - 25 -


and his travel (the business purpose requirement).    See id.; see

also 41 C.F.R. sec. 301-7.2(a)(2) (1994 & 1996).

     Nor do we agree with respondent that a taxpayer is precluded

from deducting travel expenses under section 162(a)(2) if he or

she does not pay for lodging or meal costs for his or her travel.

The mere fact that a taxpayer is furnished with meals and lodging

without charge while employed away from home does not necessarily

mean that he or she will not incur other ordinary and necessary

travel expenses.   In fact, the Commissioner has recognized as

much in the subject revenue procedures wherein he states that

“the amount of ordinary and necessary business expenses of an

employee for lodging, meal, and/or incidental expenses incurred

while traveling away from home will be deemed substantiated * * *

when * * * [the employer] provides a per diem allowance” to the

employee equal to the applicable M&IE rate.   E.g., Rev. Proc. 96-

28, 1996-1 C.B. at 686.   We also note that 41 C.F.R. sec. 301-

7.12(a)(2) (1994 & 1996) sets forth explicit rules which reduce

the M&IE rates when the Government furnishes meals to an employee

without charge and clarifies that “The total amount of deductions

made on partial days shall not cause the employee to receive less

than the amount allocated for incidental expenses.”

     We turn to the applicable revenue procedures.    Respondent

focuses on the fact that those revenue procedures provide that an

employee without a travel allowance may use the revenue
                               - 26 -


procedures to compute a deduction for “meals and incidental

expenses”.   Respondent concludes from the quoted language that

the revenue procedures apply only when both meals and incidental

expenses are incurred, or when meals alone are incurred.    We

disagree with respondent’s conclusion.   We do not see how the

language “meals and incidental expenses” could be construed to

apply when only meals are incurred but not when only incidental

expenses are incurred.   We read the revenue procedures to apply

to three distinct situations; i.e., (1) where a traveling

employee pays only for meals, (2) where a traveling employee pays

for both meals and incidental expenses, and (3) where a traveling

employee pays only for incidental expenses.

     We are mindful that the relevant provision of the revenue

procedures is headed “Optional method for meals only deduction.”

E.g., sec. 4.03 of Rev. Proc. 96-28, 1996-1 C.B. 686.   However,

we do not believe that this heading is dispositive as to the

breadth of the related text.   That text, when read in the context

of the related revenue procedure as a whole, clarifies that the

provision was intended to apply to costs for both meals and

incidental expenses.   The revenue procedures allow a taxpayer to

compute a deduction for business meals and incidental expenses in

accordance with the rules of the travel regulations set forth in
                               - 27 -


41 C.F.R. chapter 301.7    See, e.g., Rev. Proc. 90-60, sec. 1,

1990-2 C.B. at 651 (an employee may use the revenue procedures to

compute the “deductible costs of business meal and incidental

expenses paid or incurred while traveling away from home”); see

also id. sec. 6.01, 1990-2 C.B. at 655 (“the Federal M&IE rate

described in section 3.02 for the locality of travel will be

applied in the same manner as applied under the Federal Travel

Regulations, 41 C.F.R. Part 301-7 (1990), except as provided in

sections 6.02 through 6.04.”).8    The travel regulations, in turn,

provide a specific mechanism under which the applicable M&IE

rates are reduced whenever the employer provides the traveler

with meals at no charge.    See, e.g., 41 C.F.R. sec. 301-

7.12(a)(2) (1994 & 1996).    We conclude that an employee is not

precluded by the revenue procedures from using the procedures

when he or she pays only for incidental expenses, just as an

employee is not precluded by the revenue procedures from using

the procedures when he or she pays only for meals.


     7
       Respondent makes no reference to this provision or to the
fact that the revenue procedures apply the M&IE rates in
accordance with the rules of those regulations.
     8
       None of these exceptions are applicable herein; e.g., Rev.
Proc. 90-60, sec. 6.03, 1990-2 C.B. 651, 655, does not apply
because petitioner was never responsible for the cost of his
meals. Moreover, the fact that 41 C.F.R. sec. 301-7.12(a)(2)
(1994 & 1996) provides explicitly that the M&IE rate must be
reduced when the Government provides an employee with meals at no
charge counters petitioner’s argument that we should not reduce
the M&IE rates to take into account his employer-provided meals.
                              - 28 -


     Given our conclusion that petitioner may use the revenue

procedures to ascertain the amount of his deductible incidental

expenses, petitioner asks the Court to allow him to use the full

M&IE rates to ascertain those deductions.   We decline to do so.

We do not read the revenue procedures to allow a taxpayer to use

the full M&IE rates when he or she incurs only incidental

expenses.   The M&IE rates represent the amount that the

Government pays daily to its traveling employees to compensate

them for four items of traveling expense; namely, breakfast,

lunch, dinner, and incidental expenses.   See 41 C.F.R. sec. 301-

7.2(a)(2) (1994 & 1996).   Specific amounts are apportioned under

the travel regulations to each of these four items, depending on

the point of travel.9   The portion of the M&IE rates that is

attributable to incidental expenses incurred in all of the CONUS



     9
       The definition of the term “incidental expenses” under the
travel regulations is slightly broader than the definition of the
same term under the applicable revenue procedures. Compare 41
C.F.R. sec. 301-7.1(c)(3) (1994 & 1996), with Rev. Proc. 90-60,
sec. 3.02(4), 1990-2 C.B. at 652. Section 301-7.1(c)(3) of 41
C.F.R. (1994 & 1996) provides:

          (3) Incidental expenses covered by per diem. (i)
     Fees and tips to porters, baggage carriers, bellhops,
     hotel maids, stewards, and stewardesses and others on
     vessels, and hotel servants in foreign countries.

          (ii) Laundry and cleaning and pressing of
     clothing.

          (iii) Transportation between places of lodging or
     business and places where meals are taken * * *.
                               - 29 -


locations is $2.    See 41 C.F.R. sec. 301-7.12(a)(2)(i) (1994 &

1996).    The portion of the M&IE rates that is attributable to

incidental expenses incurred in any other location varies from $1

to $53, depending on the M&IE rate for that location.      See 41

C.F.R. ch. 301, app. B (1994 & 1996).    We believe that

petitioner’s deductions for his incidental expenses are limited

under the travel regulations, which are incorporated by reference

into the revenue procedures, to the incidental expense portion of

the applicable M&IE rate.10   See 41 C.F.R. sec. 301-7.12(a)(2)

(1994 & 1996), which provides that the M&IE rate must be reduced

“When all or part of the meals are furnished at no cost or at a

nominal cost to the employee by the Federal Government”.

     We note that taxpayers such as petitioner need not limit

their deductions to the incidental expense portion of the M&IE

rates.    Specifically, taxpayers, to the extent that the amounts

set forth in the revenue procedures fail to reflect the actual

cost of their incidental expenditures, are entitled to a

deduction for their actual expenses.    In such a situation,

however, taxpayers must be prepared to meet all the

substantiation requirements, including, especially, written



     10
       Petitioner argues that his deductions at these rates
should not be subject to the 50-percent reduction for meals and
entertainment. We agree. The Rule 155 computation should
reflect a deduction of the entire amounts of the M&IE rates which
are attributable to incidental expenses.
                             - 30 -


documentation as to the amounts of those costs.    But see sec.

1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017

(Nov. 6, 1985) (written documentation generally not required for

any expenditure less than $25); Notice 95-50, 1995-2 C.B. 333

(notifies taxpayers that sec. 1.274-5T(c)(2)(iii)(B), Temporary

Income Tax Regs., 50 Fed. Reg. 46019 (Nov. 6, 1985), will be

amended to provide that no receipts are required for expenditures

less than $75 which are incurred after Oct. 1, 1995).11    Accord

41 C.F.R. sec. 301-11.25 (1998) (a traveler must provide “a

receipt for any authorized expense incurred costing over $75, or

a reason acceptable to your agency explaining why you are unable

to provide the necessary receipt”).

     We have considered all arguments in this case.     Those

arguments not discussed herein are without merit or irrelevant.

To reflect the foregoing,

                                           Decision will be entered

                                      under Rule 155.




     11
       The record does not allow us to apply either of these
provisions. In particular, we note that petitioner has not
specified the dollar amounts which he actually paid for any of
his incidental expenses.
