Rev. Rul. 64-153

Advice has been requested whether dislocation allowances and trailer allowances received by members of the uniformed services under authority of section 303(c) of the Career Compensation Act of 1949, 37 U.S.C. 253(c), as amended, are includible in the gross income of the recipients.

Section 303(c) of the Career Compensation Act of 1949, provides, in part, that, under certain conditions, members of the uniformed services, when ordered to make a change of permanent station shall be entitled to an allowance for transportation of dependents, luggage, and household effects, or reimbursement therefor. As amended, the Act also provides that a member of a uniformed service, whose dependents are authorized to move and actually move in connection with his permanent change of station, shall be entitled to a dislocation allowance equal to his monthly basic allowance for quarters. In lieu of transportation of baggage and household effects, a member who transports a house trailer or mobile dwelling within the continental United States for use as a residence, and who would otherwise be entitled to transportation of household effects, shall be entitled to a reasonable allowance.

Chapter 9 of the Joint Travel Regulations for the uniformed services states that the purpose of the dislocation allowance is to partially reimburse a member with dependents for expenses incurred in relocating his household upon a permanent change of station. The regulations also provide that, with certain exceptions, the dislocation allowance is in addition to all other authorized allowances and is normally payable to a member whenever his dependents relocate their household in connection with not more than one permanent change of station within the fiscal year.

The dislocation allowance is meant to defray such extra costs as lease forfeitures, temporary living charges in hotels and boarding houses pending establishment of a normal household, breakage and depreciation of household goods in transit, and other expenses which are related to, but not literally a part of, moving expenses. See H.R. Report No. 90, Eighty-fourth Congress, 11, and S. Report No. 125, Eighty-fourth Congress, 17.

Chapter 10 of the Joint Travel Regulations, which sets forth the conditions governing payment of the trailer allowance, provides that a member may elect to receive the trailer allowance in lieu of both the transportation of baggage and household goods and the dislocation allowance, if eligible therefor.

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, * * *.

Revenue Ruling 54-429, C.B. 1954-2, 53, holds, in part, that where an employee is transferred in the interest of his employer from one official station to another for permanent duty, the allowance or reimbursement received for moving his immediate family, household goods and personal effects is not includible in the gross income of the employee if the total amount of the reimbursement or allowance is expended for such purpose. Any excess of the allowance or reimbursement over the actual expenses incurred for such purpose is includible in his gross income. Thus, an amount received by a member of the uniformed services as an allowance or reimbursement for moving his dependents and household goods from one station to another in connection with the member's permanent change of station is not includible in such member's gross income.

The dislocation allowances are made to cover costs which are merely related to, but not a part of, moving expenses incurred in transporting a member's dependents, household goods, and personal effects to a new duty station and are in addition to allowances designed to defray moving expenses. However, the trailer allowances are received in lieu of moving allowances for the purpose of defraying the costs of moving a trailer containing the household goods and personal effects of the recipient.

Accordingly, it is held that a dislocation allowance received by a member of the uniformed services under authority of section 303(c) of the Career Compensation Act of 1949, as amended, and which is in addition to allowances for moving expenses, is includible in the gross income of the recipient. However, the trailer allowance authorized by such Act is not includible in the recipient's gross income if the total amount thereof is expended for the purpose authorized. Any excess of the allowance over the actual expenses incurred for such purpose is includible in his gross income.