Rev. Rul. 72-123

Advice has been requested as to the Federal income tax treatment, as a result of amendments in the Internal Revenue Code of 1954 by the Tax Reform Act of 1969, P.L. 91-172, C.B. 1969-3, 10, of temporary lodging allowances paid to members of the uniformed services in connection with a change in their permanent duty station.

Section 405, Title 37 U.S.C. provides, in part, that the Secretaries concerned may authorize the payment of a per diem, considering all elements of the cost of living to members of the uniformed services under their jurisdiction and their dependents, including the cost of quarters, subsistence, and other necessary incidental expenses, to such a member who is on duty outside of the United States or in Hawaii or Alaska, whether or not he is in a travel status. However, dependents may not be considered in determining the per diem allowance for a member in a travel status.

Revenue Ruling 61-111, C.B. 1961-1, 9, states that temporary lodging allowances paid to members of the Armed Forces of the United States under section 303(b) of the Career Compensation Act of 1949 (Codified as section 405, Title 37 U.S.C.) are 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.

The Revenue Ruling holds that since the temporary lodging allowance is paid as an additional subsistence and quarters allowance, it is not a travel allowance of the kind includible in gross income under section 1.61-2(b) of the Income Tax Regulations and, therefore, such allowance is excludable from gross income under section 1.61-2(b) of the regulations. Effective for taxable years beginning after December 31, 1969 the Tax Reform Act of 1969 expanded the types of items now deductible as moving expenses under section 217 of the Code and, subject to certain limitations, a deduction is now permitted for meals and lodging while occupying temporary quarters in the general location of the new principal place of work during any period of 30 consecutive days after obtaining employment.

Section 82 of the Code, added by the Tax Reform Act of 1969, provides that with respect to taxable years beginning after December 31, 1969, there shall be included in gross income (as compensation for services) any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence which is attributable to employment or self-employment.

Accordingly, it is held that temporary lodging allowances paid to personnel of the Armed Forces in connection with a change in their permanent duty station are includible in their gross income under the provisions of section 82 of the Code.

Since final regulations under section 82 of the Code have not been promulgated, under the provisions of section 7805(b) of the Code, the conclusion of this Revenue Ruling will be applied only to temporary lodging allowances paid after December 31, 1971. Amounts included in gross income under section 82 of the Code are deductible to the extent provided by section 217 of the Code.

Revenue Ruling 61-111, C.B. 1961-1, 9, is revoked with respect to payments made after December 31, 1971.