Rev. Rul. 55-475

The police officers of a certain State, pursuant to a State statute, receive varying amounts, according to their rank, as reimbursement for expenses properly incurred in the performance of their official duties. Included in such reimbursement is an allowance for subsistence. Held, to the extent that this allowance for subsistence is not in excess of the statutory limitation of $5 a day, it is excludable from the gross income of the police officers under the provisions of section 120 of the Internal Revenue Code of 1954 and is excepted from withholding of income tax at the source within the purview of section 406.207(c) of Regulations 120 (relating to collection of income tax at source on wages), which is applicable under section 3401 of the 1954 Code by virtue of Treasury Decision 6091, C.B. 1954-2, 47. Although section 162(a)(2) of the Code provides a deduction for traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business, no deduction is allowable for subsistence expenses paid to the extent that the subsistence allowance is excludable from gross income under section 120 of the Code. But, if the subsistence allowance received is more than $5 a day, (1) the excess over $5 a day is includible in the gross income of the officers and, (2) except for the portion of such excess that qualifies as an expenditure for subsistence which may be deductible as traveling expenses under section 162(a)(2) of the Code, such excess is subject to the withholding of income tax on wages at the source.

This Revenue Ruling has no effect upon the treatment of any amounts paid to such police officials as reimbursement for expenses other than subsistence