Rev. Rul. 54-429

Reconsideration has been given to the position of the Internal Revenue Service relative to the treatment, for Federal income tax purposes, of amounts received by an employee, representing allowances or reimbursements for moving himself, his immediate family, household goods and personal effects, in the case of a transfer, in the interest of his employer, from one official station to another for permanent duty.

O.D. 1135, C.B. 5, 174 (1921), holds that transportation charges paid by the Government on account of the transportation of the families of Army officers are in the nature of additional compensation and as such must be included in gross income. I.T. 3022, C.B. XV-2, 76 (1936), similarly holds that the cost of transportation of dependents of officers and enlisted men of of Coast Guard which is paid by the Government must be reported as taxable income, and no deduction therefor may be allowed in computing net income. However, in G.C.M. 18430, C.B. 1937-1, 137, it is held that where an employee of the State Department is transferred from one foreign post of duty to another for the convenience of the Government, the amount received by him as reimbursement of cost of transportation for himself and family should not be included in gross income.

Section 22(a) of the Internal Revenue Code of 1939 provides in part as follows:

GENERAL DEFINITION.-`Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service * * * of whatever kind and in whatever form paid * * *.

The payment or reimbursement by an employer of the cost of moving an employee, his immediate family, household goods, and personal effects from one place of employment to another permanent place of employment, primarily for the benefit of the employer, is not compensatory in nature. There is no essential difference between a payment of such cost directly by the employer and the payment by the employee and subsequent reimbursement by the employer.

Accordingly, it is concluded that (1) amounts received by an employee from his employer representing allowances or reimbursements for moving himself, his immediate family, household goods and personal effects, in case of a transfer in the interest of his employer, from one official station to another for permanent duty, do not represent compensation within the meaning of section 22(a) of the Code, and are not includible in the gross income of the employee if the total amount of the reimbursement or allowance is expended for such purposes; (2) any excess of the allowances or reimbursements over the actual expenses incurred is includible in the employee's gross income; and (3) any moving expenses paid or incurred by the employee in excess of the allowances or reimbursements are not deductible for Federal income tax purposes, since they represent personal, living or family expenses within the meaning of section 24(a) of the Code. In any case in which the transfer is made primarily for the benefit of the employee, any allowance or reimbursement received by the employee is includible in his gross income.

Amounts received as allowances or reimbursements for meals and lodging of the employee and his family while awaiting permanent quarters at the new post of duty are includible in gross income of the employee.

O.D. 1135, C.B. 5, 174 (1921), and I.T. 3022, C.B. XV-2, 76 (1936), are modified to the extent that they are inconsistent with the views expressed herein.