Income Tax Treatment

RESEARCH MEMORANDUM: INCOME TAX TREATMENT OF CERTAIN JOBHUNTING AND RELOCATION EXPENSES FOR JIM AND MARY MARTIN

1. The children of Jim and Mary Martin do not live with the Martins, [are not supported by the Martins, and the Martin's children are adults].

2. Jim Martin accepted a job 1,900 miles distant from the Martin's primary residence before any trips were made to househunt in the new location.

3. Mary Martin accepted a new job subsequent to the move by the Martins to California.

4. [The case data itemizing the cost of the move by the Martins to California in August was in error in stating that $2,400 in costs were incurred for "discount points on home loan paid for by buyer," and that a statement of "paid for by seller" was intended]. If the discount points on the loan for the sale of the Martin's Illinois house had been paid by the buyer, the money would not have represented a cost to the Martins. As the $2,400 is indicated as a cost to the Martins, [it was assumed by the researcher that the discount points were paid by the Martins the sellers].

1. Can Jim Martin's reimbursed travel expenses for jobhunting interviews conducted prior to the Martin's trip to California in May be deducted from the couple's income on their joint federal income tax return?

2. Can the costs associated with Mary Martin's interviews conducted in conjunction with a trip to California by Jim and Mary Martin in May be deducted from the couple's income on their jo

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s a realistic probability that this conclusion will be upheld. The trip was taken primarily for business purposes (two of the three days were devoted to househunting connected with a job change), a requirement for trips between points within the United States (Treasury Reg. ( 1.1622(b)(1)). Househunting expenses are deductible when the new job location is at least 35 miles distant from the taxpayer's existing residence. A maximum of $1,500 may be deducted for househunting expenses, and it is this limitation that causes some of the trip expense to be nondeductible. 5. No. All of the costs associated with the Martin's actual move to California cannot be deducted from the couple's income on their joint federal income tax return. There exists a realistic possibility that this conclusion will be upheld. There is no limit on the deductibility of direct moving expenses, or on travel expenses to the new location, although travel expenses are subject to a reasonableness standard. The only expense items that are questionable for the Martin's move are the $350 for car repair, and the discount points paid by the Martins on the home loan for the buyer of their Illinois residence. It is these expense items that are not deductib

Category: Government - I