Rev. Rul. 61-111

Advice has been requested whether a commissioned officer of the Armed Forces may exclude from gross income a temporary lodging allowance under the circumstances described below.

The taxpayer, a commissioned officer in the Armed Forces of the United States, was transferred from a post within the United States to a permanent duty station outside the continental United States. While awaiting assignment of permanent quarters for himself and his wife, the taxpayer received a station allowance of the type known as a temporary lodging allowance. This allowance consisted of per diem payments of x dollars for a period of 12 days.

Station allowances of the type involved in the instant case are authorized by section 303(b) of the Career Compensation Act of 1949, 37 U.S.C. 253(b), as amended. Temporary lodging allowances are more fully described in the Joint Travel Regulations for the uniformed services.

Paragraph 4303 of the Joint Travel Regulations states that temporary lodging allowances are authorized for the purpose of partially reimbursing a member for the more than normal expenses incurred at hotels or hotel-like accommodations and public restaurants upon initial arrival at (or immediately preceding departure from) a permanent duty station outside the United States and pending assignment of Government quarters or completion of arrangements for other quarters. In the case of officer personnel, this allowance is paid in addition to the regular allowances for quarters and subsistence.

Section 61 of the Internal Revenue Code of 1954 provides, in part, as follows:

(a) GENERAL DEFINITION.--Except as otherwise provided * * * gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, and similar items * * *.

However, section 1.61-2(b) of the Income Tax Regulations provides, in pertinent part, that subsistence allowances granted commissioned officers of the Armed Forces of the United States, and amounts received by them as commutation of quarters are to be excluded from gross income; but, per diem allowances in lieu of subsistence and the mileage allowance received by such persons while in a travel status or on temporary duty away from their permanent stations shall be included in their gross income.

Since the instant allowance is paid as an additional subsistence and quarters allowance, it is clear that it is not a travel allowance of the kind includible in gross income under section 1.61-2(b) of the regulations. Therefore, such allowance qualifies for exclusion from gross income under section 1.61-2(b) of the regulations.

Revenue Ruling 54-429, C.B. 1954-2, 53, states, as far as here pertinent, that amounts received as allowances or reimbursement for meals and lodging of an employee and his family while awaiting permanent quarters at a new post of duty, must be included in gross income. However, Revenue Ruling 54-429 does not require the inclusion in gross income of subsistence and quarters allowances which are excludable from gross income under section 1.61-2(b) of the regulations. Since, in the instant case, the allowances are considered as coming within the provisions of section 1.61-2(b) of the regulations, Revenue Ruling 54-429 is not applicable.

Accordingly, based on the foregoing, it is held that a commissioned officer of the Armed Forces may exclude from gross income a temporary lodging allowance received in addition to his basic allowance for quarters and subsistence pending assignment of permanent quarters at a new post of duty located outside the continental United States.

Revenue Ruling 54-429, C.B. 1954-2, 53, distinguished.