[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.217-2]

[Page 363-380]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.217-2  Deduction for moving expenses paid or incurred in taxable 
years beginning after December 31, 1969.

    (a) Allowance of deduction--(1) In general. Section 217(a) allows a 
deduction from gross income for moving expenses paid or incurred by the 
taxpayer during the taxable year in connection with his commencement of 
work as an employee or as a self-employed individual at a new principal 
place of work. For purposes of this section, amounts are considered as 
being paid or incurred by an individual whether goods or services are 
furnished to the taxpayer directly (by an employer, a client, a 
customer, or similar person) or indirectly (paid to a third party on 
behalf of the taxpayer by an employer, a client, a customer, or similar 
person). A cash basis taxpayer will treat moving expenses as being paid 
for purposes of section 217 and this section in the year in which the 
taxpayer is considered to have received such payment under section 82 
and Sec. 1.82-1. No deduction is allowable under section 162 for any 
expenses incurred by the taxpayer in connection with moving from one 
residence to another residence unless such expenses are deductible under 
section 162 without regard to such change in residence. To qualify for 
the deduction under section 217 the expenses must meet the definition of 
the term moving expenses provided in section 217(b) and the taxpayer 
must meet the conditions set forth in section 217(c). The term employee 
as used in this section has the same meaning as in Sec. 31.3401(c)-1 of 
this chapter (Employment Tax Regulations). The term self-employed 
individual as used in this section is defined in paragraph (f)(1) of 
this section.
    (2) Expenses paid in a taxable year other than the taxable year in 
which reimbursement representing such expenses is received. In general, 
moving expenses are deductible in the year paid or incurred. If a 
taxpayer who uses the cash receipts and disbursements method of 
accounting receives reimbursement for a moving expense in a taxable year 
other than the taxable year the taxpayer pays such expense, he may elect 
to deduct such expense in the taxable year that he receives such 
reimbursement, rather than the taxable year when he paid such expense in 
any case where:
    (i) The expense is paid in a taxable year prior to the taxable year 
in which the reimbursement is received, or
    (ii) The expense is paid in the taxable year immediately following 
the taxable year in which the reimbursement is received, provided that 
such expense is paid on or before the due date prescribed for filing the 
return (determined with regard to any extension of time for such filing) 
for the taxable year in which the reimbursement is received.

An election to deduct moving expenses in the taxable year that the 
reimbursement is received shall be made by claiming the deduction on the 
return, amended return, or claim for refund for the taxable year in 
which the reimbursement is received.
    (3) Commencement of work. (i) To be deductible the moving expenses 
must be paid or incurred by the taxpayer in

[[Page 364]]

connection with his commencement of work at a new principal place of 
work (see paragraph (c)(3) of this section for a discussion of the term 
principal place of work). Except for those expenses described in section 
217(b)(1) (C) and (D) it is not necessary for the taxpayer to have made 
arrangements to work prior to his moving to a new location; however, a 
deduction is not allowable unless employment or self-employment actually 
does occur. The term commencement includes (a) the beginning of work by 
a taxpayer as an employee or as a self-employed individual for the first 
time or after a substantial period of unemployment or part-time 
employment, (b) the beginning of work by a taxpayer for a different 
employer or in the case of a self-employed individual in a new trade or 
business, or (c) the beginning of work by a taxpayer for the same 
employer or in the case of a self-employed individual in the same trade 
or business at a new location. To qualify as being in connection with 
the commencement of work, the move must bear a reasonable proximity both 
in time and place to such commencement at the new principal place of 
work. In general, moving expenses incurred within 1 year of the date of 
the commencement of work are considered to be reasonably proximate in 
time to such commencement. Moving expenses incurred after the 1-year 
period may be considered reasonably proximate in time if it can be shown 
that circumstances existed which prevented the taxpayer from incurring 
the expenses of moving within the 1-year period allowed. Whether 
circumstances existed which prevented the taxpayer from incurring the 
expenses of moving within the period allowed is dependent upon the facts 
and circumstances of each case. The length of the delay and the fact 
that the taxpayer may have incurred part of the expenses of the move 
within the 1-year period allowed shall be taken into account in 
determining whether expenses incurred after such period are allowable. 
In general, a move is not considered to be reasonably proximate in place 
to the commencement of work at the new princpal place of work where the 
distance between the taxpayer's new residence and his new principal 
place of work exceeds the distance between his former residence and his 
new principal place of work. A move to a new residence which does not 
satisfy this test may, however, be considered reasonably proximate in 
place to the commencement of work if the taxpayer can demonstrate, for 
example, that he is required to live at such residence as a condition of 
employment or that living at such residence will result in an actual 
decrease in commuting time or expense. For example, assume that in 1977 
A is transferred by his employer to a new principal place of work and 
the distance between his former residence and his new principal place of 
work is 35 miles greater than was the distance between his former 
residence and his former principal place of work. However, the distance 
between his new residence and his new principal place of work is 10 
miles greater than was the distance between his former residence and his 
new principal place of work. Although the minimum distance requirement 
of section 217(c)(1) is met the expenses of moving to the new residence 
are not considered as incurred in connection with A's commencement of 
work at his new principal place of work since the new residence is not 
proximate in place to the new place of work. If, however, A can 
demonstrate, for example, that he is required to live at such new 
residence as a condition of employment or if living at such new 
residence will result in an actual decrease in commuting time or 
expense, the expenses of the move may be considered as incurred in 
connection with A's commencement of work at his new principal place of 
work.
    (ii) The provisions of subdivision (i) of this subparagraph may be 
illustrated by the following examples:

    Example 1. Assume that A is tranferred by his employer from Boston, 
MA, to Washington, DC. A moves to a new residence in Washington, DC, and 
commences work on February 1, 1971. A's wife and his two children remain 
in Boston until June 1972 in order to allow A's children to complete 
their grade school education in Boston. On June 1, 1972, A sells his 
home in Boston and his wife and children move to the new residence in 
Washington, DC. The expenses incurred on June 1, 1972, in selling the 
old residence and in moving A's family, their household goods, and 
personal effects to the new residence in

[[Page 365]]

Washington are allowable as a deduction although they were incurred 16 
months after the date of the commencement of work by A since A has moved 
to and established a new residence in Washington, DC, and thus incurred 
part of the total expenses of the move prior to the expiration of the 1-
year period.
    Example 2. Assume that A is transferred by his employer from 
Washington, DC, to Baltimore, MD. A commences work on January 1, 1971, 
in Baltimore. A commutes from his residence in Washington to his new 
principal place of work in Baltimore for a period of 18 months. On July 
1, 1972, A decides to move to and establish a new residence in 
Baltimore. None of the moving expenses otherwise allowable under section 
217 may be deducted since A neither incurred the expenses within 1 year 
nor has shown circumstances under which he was prevented from moving 
within such period.

    (b) Definition of moving expenses--(1) In general. Section 217(b) 
defines the term moving expenses to mean only the reasonable expenses 
(i) of moving household goods and personal effects from the taxpayer's 
former residence to his new residence, (ii) of traveling (including 
meals and lodging) from the taxpayer's former residence to his new place 
of residence, (iii) of traveling (including meals and lodging), after 
obtaining employment, from the taxpayer's former residence to the 
general location of his new principal place of work and return, for the 
principal purpose of searching for a new residence, (iv) of 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, or (v) of a nature constituting qualified 
residence sale, purchase, or lease expenses. Thus, the test of 
deductibility is whether the expenses are reasonable and are incurred 
for the items set forth in subdivisions (i) through (v) of this 
subparagraph.
    (2) Reasonable expenses. (i) The term moving expenses includes only 
those expenses which are reasonable under the circumstances of the 
particular move. Expenses paid or incurred in excess of a reasonable 
amount are not deductible. Generally, expenses paid or incurred for 
movement of household goods and personal effects or for travel 
(including meals and lodging) are reasonable only to the extent that 
they are paid or incurred for such movement or travel by the shortest 
and most direct route available from the former residence to the new 
residence by the conventional mode or modes of transportation actually 
used and in the shortest period of time commonly required to travel the 
distance involved by such mode. Thus, if moving or travel arrangements 
are made to provide a circuitous route for scenic, stopover, or other 
similar reasons, additional expenses resulting therefrom are not 
deductible since they are not reasonable nor related to the commencement 
of work at the new principal place of work. In addition, expenses paid 
or incurred for meals and lodging while traveling from the former 
residence to the new place of residence or to the general location of 
the new principal place of work and return or occupying temporary 
quarters in the general location of the new principal place of work are 
reasonable only if under the facts and circumstances involved such 
expenses are not lavish or extravagant.
    (ii) The application of this subparagraph may be illustrated by the 
following example:

    Example. A, an employee of the M Company works and maintains his 
residence in Boston, MA. Upon receiving orders from his employer that he 
is to be transferred to M's Los Angeles, CA, office, A motors to Los 
Angeles with his family with stopovers at various cities between Boston 
and Los Angeles to visit friends and relatives. In addition, A detours 
into Mexico for sightseeing. Because of the stopovers and tour into 
Mexico, A's travel time and distance are increased over what they would 
have been had he proceeded directly to Los Angeles. To the extent that 
A's route of travel between Boston and Los Angeles is in a generally 
southwesterly direction it may be said that he is traveling by the 
shortest and most direct route available by motor vehicle. Since A's 
excursion into Mexico is away from the usual Boston-Los Angeles route, 
the portion of the expenses paid or incurred attributable to such 
excursion is not deductible. Likewise, that portion of the expenses 
attributable to A's delay en route in visiting personal friends and 
sightseeing are not deductible.

    (3) Expense of moving household goods and personal effects. Expenses 
of moving household goods and personal effects include expenses of 
transporting such goods and effects from the taxpayer's former residence 
to his new residence, and expenses of packing, crating, and

[[Page 366]]

in-transit storage and insurance for such goods and effects. Such 
expenses also include any costs of connecting or disconnecting utilities 
required because of the moving of household goods, appliances, or 
personal effects. Expenses of storing and insuring household goods and 
personal effects constitute in-transit expenses if incurred within any 
consecutive 30-day period after the day such goods and effects are moved 
from the taxpayer's former residence and prior to delivery at the 
taxpayer's new residence. Expenses paid or incurred in moving household 
goods and personal effects to the taxpayer's new residence from a place 
other than his former residence are allowable, but only to the extent 
that such expenses do not exceed the amount which would be allowable had 
such goods and effects been moved from the taxpayer's former residence. 
Expenses of moving household goods and personal effects do not include, 
for example, storage charges (other than in-transit), costs incurred in 
the acquisition of property, costs incurred and losses sustained in the 
disposition of property, penalties for breaking leases, mortgage 
penalties, expenses of refitting rugs or draperies, losses sustained on 
the disposal of memberships in clubs, tuition fees, and similar items. 
The above expenses may, however, be described in other provisions of 
section 217(b) and if so a deduction may be allowed for them subject to 
the allowable dollar limitations.
    (4) Expenses of traveling from the former residence to the new place 
of residence. Expenses of traveling from the former residence to the new 
place of residence include the cost of transportation and of meals and 
lodging en route (including the date of arrival) from the taxpayer's 
former residence to his new place of residence. Expenses of meals and 
lodging incurred in the general location of the former residence within 
1 day after the former residence is no longer suitable for occupancy 
because of the removal of household goods and personal effects shall be 
considered as expenses of traveling for purposes of this subparagraph. 
The date of arrival is the day the taxpayer secures lodging at the new 
place of residence, even if on a temporary basis. Expenses of traveling 
from the taxpayer's former residence to his new place of residence do 
not include, for example, living or other expenses following the date of 
arrival at the new place of residence and while waiting to enter the new 
residence or waiting for household goods to arrive, expenses in 
connection with house or apartment hunting, living expenses preceding 
date of departure for the new place of residence (other than expenses of 
meals and lodging incurred within 1 day after the former residence is no 
longer suitable for occupancy), expenses of trips for purposes of 
selling property, expenses of trips to the former residence by the 
taxpayer pending the move by his family to the new place of residence, 
or any allowance for depreciation. The above expenses may, however, be 
described in other provisions of section 217(b) and if so a deduction 
may be allowed for them subject to the allowable dollar limitations. The 
deduction for traveling expenses from the former residence to the new 
place of residence is allowable for only one trip made by the taxpayer 
and members of his household; however, it is not necessary that the 
taxpayer and all members of his household travel together or at the same 
time.
    (5) Expenses of traveling for the principal purpose of looking for a 
new residence. Expenses of traveling, after obtaining employment, from 
the former residence to the general location of the new principal place 
of work and return, for the principal purpose of searching for a new 
residence include the cost of transportation and meals and lodging 
during such travel and while at the general location of the new place of 
work for the principal purpose of searching for a new residence. 
However, such expenses do not include, for example, expenses of meals 
and lodging of the taxpayer and members of his household before 
departing for the new principal place of work, expenses for trips for 
purposes of selling property, expenses of trips to the former residence 
by the taxpayer pending the move by his family to the place of 
residence, or any allowance for depreciation. The above expenses may, 
however, be described in other provisions of section 217(b) and if so a 
deduction may

[[Page 367]]

be allowed for them. The deduction for expenses of traveling for the 
principal purpose of looking for a new residence is not limited to any 
number of trips by the taxpayer and by members of his household. In 
addition, the taxpayer and all members of his household need not travel 
together or at the same time. Moreover, a trip need not result in 
acquisition of a lease of property or purchase of property. An employee 
is considered to have obtained employment in the general location of the 
new principal place of work after he has obtained a contract or 
agreement of employment. A self-employed individual is considered to 
have obtained employment when he has made substantial arrangements to 
commence work at the new principal place of work (see paragraph (f)(2) 
of this section for a discussion of the term made substantial 
arrangements to commence to work).
    (6) Expenses of occupying temporary quarters. Expenses of occupying 
temporary quarters include only the cost of 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 
the taxpayer has obtained employment in such general location. Thus, 
expenses of occupying temporary quarters do not include, for example, 
the cost of entertainment, laundry, transportation, or other personal, 
living family expenses, or expenses of occupying temporary quarters in 
the general location of the former place of work. The 30 consecutive day 
period is any one period of 30 consecutive days which can begin, at the 
option of the taxpayer, on any day after the day the taxpayer obtains 
employment in the general location of the new principal place of work.
    (7) Qualified residence sale, purchase, or lease expenses. Qualified 
residence sale, purchase, or lease expenses (hereinafter ``qualified 
real estate expenses'') are only reasonable amounts paid or incurred for 
any of the following purposes:
    (i) Expenses incident to the sale or exchange by the taxpayer or his 
spouse of the taxpayer's former residence which, but for section 217 (b) 
and (e), would be taken into account in determining the amount realized 
on the sale or exchange of the residence. These expenses include real 
estate commissions, attorneys' fees, title fees, escrow fees, so called 
``points'' or loan placement charges which the seller is required to 
pay, State transfer taxes and similar expenses paid or incurred in 
connection with the sale or exchange. No deduction, however, is 
permitted under section 217 and this section for the cost of physical 
improvements intended to enhance salability by improving the condition 
or appearance of the residence.
    (ii) Expenses incident to the purchase by the taxpayer or his spouse 
of a new residence in the general location of the new principal place of 
work which, but for section 217 (b) and (e), would be taken into account 
in determining either the adjusted basis of the new residence or the 
cost of a loan. These expenses include attorney's fees, escrow fees, 
appraisal fees, title costs, so-called ``points'' or loan placement 
charges not representing payments or prepayments of interest, and 
similar expenses paid or incurred in connection with the purchase of the 
new residence. No deduction, however, is permitted under section 217 and 
this section for any portion of real estate taxes or insurance, so-
called ``points'' or loan placement charges which are, in essence, 
prepayments of interest, or the purchase price of the residence.
    (iii) Expenses incident to the settlement of an unexpired lease held 
by the taxpayer or his spouse on property used by the taxpayer as his 
former residence. These expenses include consideration paid to a lessor 
to obtain a release from a lease, attorneys' fees, real estate 
commissions, or similar expenses incident to obtaining a release from a 
lease or to obtaining an assignee or a sublessee such as the difference 
between rent paid under a primary lease and rent received under a 
sublease. No deduction, however, is permitted under section 217 and this 
section for the cost of physical improvement intended to enhance 
marketability of the leasehold by improving the condition or appearance 
of the residence.
    (iv) Expenses incident to the acquisition of a lease by the taxpayer 
or his spouse. These expenses include the cost

[[Page 368]]

of fees or commissions for obtaining a lease, a sublease, or an 
assignment of an interest in property used by the taxpayer as his new 
residence in the general location of the new principal place of work. No 
deduction, however, is permitted under section 217 and this section for 
payments or prepayments of rent or payments representing the cost of a 
security or other similar deposit.

Qualified real estate expenses do not include losses sustained on the 
disposition of property or mortgage penalties, to the extent that such 
penalties are otherwise deductible as interest.
    (8) Residence. The term former residence refers to the taxpayer's 
principal residence before his departure for his new principal place of 
work. The term new residence refers to the taxpayer's principal 
residence within the general location of his new principal place of 
work. Thus, neither term includes other residences owned or maintained 
by the taxpayer or members of his family or seasonal residences such as 
a summer beach cottage. Whether or not property is used by the taxpayer 
as his principal residence depends upon all the facts and circumstances 
in each case. Property used by the taxpayer as his principal residence 
may include a houseboat, a housetrailer, or similar dwelling. The term 
new place of residence generally includes the area within which the 
taxpayer might reasonably be expected to commute to his new principal 
place of work.
    (9) Dollar limitations. (i) Expenses described in subparagraphs (A) 
and (B) of section 217(b)(1) are not subject to an overall dollar 
limitation. Thus, assuming all other requirements of section 217 are 
satisfied, a taxpayer who, in connection with his commencement of work 
at a new principal place of work, pays or incurs reasonable expenses of 
moving household goods and personal effects from his former residence to 
his new place of residence and reasonable expenses of traveling, 
including meals and lodging, from his former residence to his new place 
of residence is permitted to deduct the entire amount of these expenses.
    (ii) Expenses described in subparagraphs (C), (D), and (E) of 
section 217(b)(1) are subject to an overall dollar limitation for each 
commencement of work of 3,000 ($2,500 in the case of a commencement of 
work in a taxable year beginning before January 1, 1977), of which the 
expenses described in subparagraphs (C) and (D) of section 217(b)(1) 
cannot exceed $1,500 ($1,000 in the case of a commencement of work in a 
taxable year beginning before January 1, 1977). The dollar limitation 
applies to the amount of expenses paid or incurred in connection with 
each commencement of work and not to the amount of expenses paid or 
incurred in each taxable year. Thus, for example, a taxpayer who paid or 
incurred $2,000 of expenses described in subparagraphs (C), (D), and (E) 
of section 217(b)(1) in taxable year 1977 in connection with his 
commencement of work at a principal place of work and paid or incurred 
an additional $2,000 of such expenses in taxable year 1978 in connection 
with the same commencement of work is permitted to deduct the $2,000 of 
such expenses paid or incurred in taxable year 1977 and only $1,000 of 
such expenses paid or incurred in taxable year 1978.
    (iii) A taxpayer who pays or incurs expenses described in 
subparagraphs (C), (D), and (E) of section 217(b)(1) in connection with 
the same commencement of work may choose to deduct any combination of 
such expenses within the dollar amounts specified in subdivision (ii) of 
this subparagraph. For example, a taxpayer who pays or incurs such 
expenses in connection with the same commencement of work may either 
choose to deduct: (a) Expenses described in subparagraphs (C) and (D) of 
section 217(b)(1) to the extent of $1,500 ($1,000 in the case of a 
commencement of work in a taxable year beginning before January 1, 1977) 
before deducting any of the expenses described in subparagraph (E) of 
such section, or (b) expenses described in subparagraph (E) of section 
217(b)(1) to the extent of $3,000 ($2,500 in the case of a commencement 
of work in a taxable year beginning before January 1, 1977) before 
deducting any of the expenses described in subparagraphs (C) and (D) of 
such section.
    (iv) For the purpose of computing the dollar limitation contained in 
subparagraph (A) of section 217(b)(3) a commencement of work by a 
taxpayer at a

[[Page 369]]

new principal place of work and a commencement of work by his spouse at 
a new principal place of work which are in the same general location 
constitute a single commencement of work. Two principal places of work 
are treated as being in the same general location where the taxpayer and 
his spouse reside together and commute to their principal places of 
work. Two principal places of work are not treated as being in the same 
general location where, as of the close of the taxable year, the 
taxpayer and his spouse have not shared the same new residence nor made 
specific plans to share the same new residence within a determinable 
time. Under such circumstances, the separate commencements of work by a 
taxpayer and his spouse will be considered separately in assigning the 
dollar limitations and expenses to the appropriate return in the manner 
described in subdivisions (v) and (vi) of this subparagraph.
    (v) Moving expenses (described in subparagraphs (C), (D), and (E) of 
section 217(b)(1)), paid or incurred with respect to the commencement of 
work by both a husband and wife which is considered a single 
commencement of work under subdivision (iv) of this subparagraph are 
subject to an overall dollar limitation of $3,000 ($2,500 in the case of 
a commencement of work in a taxable year beginning before January 1, 
1977), per move of which the expenses described in subparagraphs (C) and 
(D) of section 217(b)(1) cannot exceed $1,500 ($1,000 in the case of a 
commencement of work in a taxable year beginning before January 1, 
1977). If separate returns are filed with respect to the commencement of 
work by both a husband and wife which is considered a single 
commencement of work under subdivision (iv) of this subparagraph, moving 
expenses (described in subparagraphs (C), (D), and (E) of section 
217(b)(1)) are subject to an overall dollar limitation of $1,500 ($1,250 
in the case of a commencement of work in a taxable year beginning before 
January 1, 1977), per move of which the expenses described in 
subparagraphs (C) and (D) of section 217(b)(1) cannot exceed $750 ($500 
in the case of a commencement of work in a taxable year beginning before 
January 1, 1977) with respect to each return. Where moving expenses are 
paid or incurred in more than 1 taxable year with respect to a single 
commencement of work by a husband and wife they shall, for purposes of 
applying the dollar limitations to such move, be subject to a $3,000 and 
$1,500 limitation ($2,500 and $1,000, respectively, in the case of a 
commencement of work in a taxable year beginning before January 1, 1977) 
for all such years that they file a joint return and shall be subject to 
a separate $1,500 and $750 limitation ($1,250 and $500, respectively, in 
the case of a commencement of work in a taxable year beginning before 
January 1, 1977) for all such years that they file separate returns. If 
a joint return is filed for the first taxable year moving expenses are 
paid or incurred with respect to a move but separate returns are filed 
in a subsequent year, the unused portion of the amount which may be 
deducted shall be allocated equally between the husband and wife in the 
later year. If separate returns are filed for the first taxable year 
such moving expenses are paid or incurred but a joint return is filed in 
a subsequent year, the deductions claimed on their separate returns 
shall be aggregated for purposes of determining the unused portion of 
the amount which may be deducted in the later year.
    (vi) The application of subdivisions (iv) and (v) of this 
subparagraph may be illustrated by the following examples:

    Example 1. A, who was transferred by his employer, effective January 
15, 1977, moved from Boston, MA, to Washington, DC. A's wife was 
transferred by her employer, effective January 15, 1977, from Boston, 
MA, to Baltimore, MD. A and his wife reside together at the same new 
residence. A and his wife are cash basis taxpayers and file a joint 
return for taxable year 1977. Because A and his wife reside together at 
the new residence, the commencement of work by both is considered a 
single commencement of work under subdivision (iv) of this subparagraph. 
They are permitted to deduct with respect to their commencement of work 
in Washington and Baltimore up to $3,000 of the expenses described in 
subparagraphs (C), (D), and (E) of section 217(b)(1) of which the 
expenses described in subparagraphs (C) and (D) of such section cannot 
exceed $1,500.
    Example 2. Assume the same facts as in Example 1 except that for 
taxable year 1977, A and his wife file separate returns. Because A

[[Page 370]]

and his wife reside together, the commencement of work by both is 
considered a single commencement of work under subdivision (iv) of this 
subparagraph. A is permitted to deduct with respect to his commencement 
of work in Washington up to $1,500 of the expenses described in 
subparagraphs (C), (D), and (E) of section 217(b)(1) of which the 
expenses described in subparagraphs (C) and (D) cannot exceed $750. A is 
not permitted to deduct any of the expenses described in subparagraphs 
(C), (D), and (E) of section 217(b)(1) paid by his wife in connection 
with her commencement of work at a new principal place of work. A's wife 
is permitted to deduct with respect to her commencement of work in 
Baltimore up to $1,500 of the expenses described in subparagraphs (C), 
(D), and (E) of section 217(b)(1) that are paid by her of which the 
expenses described in subparagraphs (C) and (D) cannot exceed $750. A's 
wife is not permitted to deduct any of the expenses described in 
subparagraphs (C), (D), and (E) of section 217(b)(1) paid by A in 
connection with his commencement of work in Washington, DC.
    Example 3. Assume the same facts as in Example 1 except that A and 
his wife take up separate residences in Washington and Baltimore, do not 
reside together during the entire taxable year, and have no specific 
plans to reside together. The commencement of work by A in Washington, 
DC, and by his wife in Baltimore are considered separate commencements 
of work since their principal places of work are not treated as being in 
the same general location. If A and his wife file a joint return for 
taxable year 1977, the moving expenses described in subparagraphs (C), 
(D), and (E) of section 217(b)(1) paid in connection with the 
commencement of work by A in Washington, DC, and his wife in Baltimore, 
MD, are subject to an overall limitation of $6,000 of which the expenses 
described in subparagrahs (C) and (D) cannot exceed $3,000. If A and his 
wife file separate returns for taxable year 1977, A may deduct up to 
$3,000 of the expenses described in subparagraphs (C), (D), and (E) of 
which the expenses described in subparagraphs (C) and (D) cannot exceed 
$1,500. A's wife may deduct up to $3,000 of the expenses described in 
subparagraphs (C), (D), and (E) of which the expenses described in 
subparagraphs (C) and (D) cannot exceed $1,500.

    (10) Individuals other than taxpayer. (i) In addition to the 
expenses set forth in subparagraphs (A) through (D) of section 217(b)(1) 
attributable to the taxpayer alone, the same type of expenses 
attributable to certain individuals other than the taxpayer, if paid or 
incurred by the taxpayer, are deductible. These other individuals must 
be members of the taxpayer's household, and have both the taxpayer's 
former residence and his new residence as their principal place of 
abode. A member of the taxpayer's household includes any individual 
residing at the taxpayer's residence who is neither a tenant nor an 
employee of the taxpayer. Thus, for example, a member of the taxpayer's 
household may not be an individual such as a servant, governess, 
chauffeur, nurse, valet, or personal attendant. However, for purposes of 
this paragraph, a tenant or employee will be considered a member of the 
taxpayer's household where the tenant or employee is a dependent of the 
taxpayer as defined in section 152.
    (ii) In addition to the expenses set forth in section 217(b)(2) paid 
or incurred by the taxpayer attributable to property sold, purchased, or 
leased by the taxpayer alone, the same type of expenses paid or incurred 
by the taxpayer attributable to property sold, purchased, or leased by 
the taxpayer's spouse or by the taxpayer and his spouse are deductible 
providing such property is used by the taxpayer as his principal place 
of residence.
    (c) Conditions for allowance--(1) In general. Section 217(c) 
provides two conditions which must be satisfied in order for a deduction 
of moving expenses to be allowed under section 217(a). The first is a 
minimum distance condition prescribed by section 217(c)(1), and the 
second is a minimum period of employment condition prescribed by section 
217(c)(2).
    (2) Minimum distance. For purposes of applying the minimum distance 
condition of section 217(c)(1) all taxpayers are divided into one or the 
other of the following categories: Taxpayers having a former principal 
place of work, and taxpayers not having a former principal place of 
work. Included in this latter category are individuals who are seeking 
fulltime employment for the first time either as an employee or on a 
self- employed basis (for example, recent high school or college 
graduates), or individuals who are reentering the labor force after a 
substantial period of unemployment or part-time employment.
    (i) In the case of a taxpayer having a former principal place of 
work, section 217(c)(1)(A) provides that no deduction

[[Page 371]]

is allowable unless the distance between the former residence and the 
new principal place of work exceeds by at least 35 miles (50 miles in 
the case of expenses paid or incurred in taxable years beginning before 
January 1, 1977) the distance between the former residence and the 
former principal place of work.
    (ii) In the case of a taxpayer not having a former principal place 
of work, section 217(c)(1)(B) provides that no deduction is allowable 
unless the distance between the former residence and the new principal 
place of work is at least 35 miles (50 miles in the case of expenses 
paid or incurred in taxable years beginning before January 1, 1977).
    (iii) For purposes of measuring distances under section 217(c)(1) 
the distance between two geographic points is measured by the shortest 
of the more commonly traveled routes between such points. The shortest 
of the more commonly traveled routes refers to the line of travel and 
the mode or modes of transportation commonly used to go between two 
geographic points comprising the shortest distance between such points 
irrespective of the route used by the taxpayer.
    (3) Principal place of work. (i) A taxpayer's principal place of 
work usually is the place where he spends most of his working time. The 
principal place of work of a taxpayer who performs services as an 
employee is his employer's plant, office, shop, store, or other 
property. The principal place of work of a taxpayer who is self-employed 
is the plant, office, shop, store, or other property which serves as the 
center of his business activities. However, a taxpayer may have a 
principal place of work even if there is no one place where he spends a 
substantial portion of his working time. In such case, the taxpayer's 
principal place of work is the place where his business activities are 
centered--for example, because he reports there for work, or is required 
either by his employer or the nature of his employment to ``base'' his 
employment there. Thus, while a member of a railroad crew may spend most 
of his working time aboard a train, his principal place of work is his 
home terminal, station, or other such central point where he reports in, 
checks out, or receives instructions. The principal place of work of a 
taxpayer who is employed by a number of employers on a relatively short-
term basis, and secures employment by means of a union hall system (such 
as a construction or building trades worker) would be the union hall.
    (ii) Where a taxpayer has more than one employment (i.e., the 
taxpayer is employed by more than one employer, or is self-employed in 
more than one trade or business, or is an employee and is self-employed 
at any particular time) his principal place of work is determined with 
reference to his principal employment. The location of a taxpayer's 
principal place of work is a question of fact determined on the basis of 
the particular circumstances in each case. The more important factors to 
be considered in making this determination are (a) the total time 
ordinarily spent by the taxpayer at each place, (b) the degree of the 
taxpayer's business activity at each place, and (c) the relative 
significance of the financial return to the taxpayer from each place.
    (iii) Where a taxpayer maintains inconsistent positions by claiming 
a deduction for expenses of meals and lodging while away from home 
(incurred in the general location of the new principal place of work) 
under section 162 (relating to trade or business expenses) and by 
claiming a deduction under this section for moving expenses incurred in 
connection with the commencement of work at such place of work, it will 
be a question of facts and circumstances as to whether such new place of 
work will be considered a principal place of work, and accordingly, 
which category of deductions he will be allowed.
    (4) Minimum period of employment. (i) Under section 217(c)(2) no 
deduction is allowed unless:
    (a) Where a taxpayer is an employee, during the 12-month period 
immediately following his arrival in the general location of the new 
principal place of work, he is a full-time employee, in such general 
location, during at least 39 weeks, or
    (b) Where a taxpayer is a self-employed individual (including a 
taxpayer who is also an employee, but is unable to satisfy the 
requirements of the 39-

[[Page 372]]

week test of (a) of this subdivision (i)), during the 24-month period 
immediately following his arrival in the general location of the new 
principal place of work, he is a full-time employee or performs services 
as a self-employed individual on a full-time basis, in such general 
location, during at least 78 weeks, of which not less than 39 weeks are 
during the 12-month period referred to above.

Where a taxpayer works as an employee and at the same time performs 
services as a self-employed individual his principal employment 
(determined according to subdivision (i) of subparagraph (3) of this 
paragraph) governs whether the 39-week or 78-week test is applicable.
    (ii) The 12-month period and the 39- week period set forth in 
subparagraph (A) of section 217(c)(2) and the 12- and 24-month periods 
as well as 39- and 78- week periods set forth in subparagraph (B) of 
such section are measured from the date of the taxpayer's arrival in the 
general location of the new principal place of work. Generally, date of 
arrival is the date of the termination of the last trip preceding the 
taxpayer's commencement of work on a regular basis and is not the date 
the taxpayer's family or household goods and effects arrive.
    (iii) The taxpayer need not remain in the employ of the same 
employer or remain self-employed in the same trade or business for the 
required number of weeks. However, he must be employed in the same 
general location of the new principal place of work during such period. 
The general location of the new principal place of work refers to a 
general commutation area and is usually the same area as the ``new place 
of residence''; see paragraph (b)(8) of this section.
    (iv) Only those weeks during which the taxpayer is a full-time 
employee or during which he performs services as a self-employed 
individual on a full-time basis qualify as a week of work for purposes 
of the minimum period of employment condition of section 217(c)(2).
    (a) Whether an employee is a full-time employee during any 
particular week depends upon the customary practices of the occupation 
in the geographic area in which the taxpayer works. Where employment is 
on a seasonal basis, weeks occurring in the off-season when no work is 
required or available may be counted as weeks of full-time employment 
only if the employee's contract or agreement of employment covers the 
off-season period and such period is less than 6 months. Thus, for 
example, a schoolteacher whose employment contract covers a 12-month 
period and who teaches on a full-time basis for more than 6 months is 
considered a full-time employee during the entire 12-month period. A 
taxpayer will be treated as a full-time employee during any week of 
involuntary temporary absence from work because of illness, strikes, 
shutouts, layoffs, natural disasters, etc. A taxpayer will, also, be 
treated as a full-time employee during any week in which he voluntarily 
absents himself from work for leave or vacation provided for in his 
contract or agreement of employment.
    (b) Whether a taxpayer performs services as a self-employed 
individual on a full-time basis during any particular week depends on 
the practices of the trade or business in the geographic area in which 
the taxpayer works. For example, a self-employed dentist maintaining 
office hours 4 days a week is considered to perform services as a self-
employed individual on a full-time basis providing it is not unusual for 
other self-employed dentists in the geographic area in which the 
taxpayer works to maintain office hours only 4 days a week. Where a 
trade or business is seasonal, weeks occurring during the off-season 
when no work is required or available may be counted as weeks of 
performance of services on a full-time basis only if the off-season is 
less than 6 months and the taxpayer performs services on a full-time 
basis both before and after the off-season. For example, a taxpayer who 
owns and operates a motel at a beach resort is considered to perform 
services as a self-employed individual on a full-time basis if the motel 
is closed for a period not exceeding 6 months during the off-season and 
if he performs services on a full-time basis as the operator of a motel 
both before and after the off-season. A taxpayer will be treated as 
performing services as a self-employed individual on a full-

[[Page 373]]

time basis during any week of involuntary temporary absence from work 
because of illness, strikes, natural disasters, etc.
    (v) Where taxpayers file a joint return, either spouse may satisfy 
the minimum period of employment condition. However, weeks worked by one 
spouse may not be added to weeks worked by the other spouse in order to 
satisfy such condition. The taxpayer seeking to satisfy the minimum 
period of employment condition must satisfy the condition applicable to 
him. Thus, if a taxpayer is subject to the 39-week condition and his 
spouse is subject to the 78-week condition and the taxpayer satisfies 
the 39-week condition, his spouse need not satisfy the 78-week 
condition. On the other hand, if the taxpayer does not satisfy the 39-
week condition, his spouse in such case must satisfy the 78-week 
condition.
    (vi) The application of this subparagraph may be illustrated by the 
following examples:

    Example 1. A is an electrician residing in New York City. He moves 
himself, his family, and his household goods and personal effects, at 
his own expense, to Denver where he commences employment with the M 
Aircraft Corporation. After working full-time for 30 weeks he 
voluntarily leaves his job, and he subsequently moves to and commences 
employment in Los Angeles, CA, which employment lasts for more than 39 
weeks. Since A was not employed in the general location of his new 
principal place of employment in Denver for at least 39 weeks, no 
deduction is allowable for moving expenses paid or incurred between New 
York City and Denver. A will be allowed to deduct only those moving 
expenses attributable to his move from Denver to Los Angeles, assuming 
all other conditions of section 217 are met.
    Example 2. Assume the same facts as in Example 1, except that A's 
wife commences employment in Denver at the same time as A, and that she 
continues to work in Denver for at least 9 weeks after A's departure for 
Los Angeles. Since she has met the 39-week requirement in Denver, and 
assuming all other requirements of section 217 are met, the moving 
expenses paid by A attributable to the move from New York City to Denver 
will be allowed as a deduction, provided A and his wife file a joint 
return. If A and his wife file separate returns moving expenses paid by 
A's wife attributable to the move from New York City to Denver will be 
allowed as a deduction on A's wife's return.
    Example 3. Assume the same facts as in Example 1, except that A's 
wife commences employment in Denver on the same day that A departs for 
Los Angeles, and continues to work in Denver for 9 weeks thereafter. 
Since neither A (who has worked 30 weeks) nor his wife (who has worked 9 
weeks) has independently satisfied the 39-week requirement, no deduction 
for moving expenses attributable to the move from New York City to 
Denver is allowable.

    (d) Rules for application of section 217(c)(2)--(1) Inapplicability 
of minimum period of employment condition in certain cases. Section 
217(d)(1) provides that the minimum period of employment condition of 
section 217(c)(2) does not apply in the case of a taxpayer who is unable 
to meet such condition by reason of:
    (i) Death or disability, or
    (ii) Involuntary separation (other than for willfull misconduct) 
from the service of an employer or separation by reason of transfer for 
the benefit of an employer after obtaining full-time employment in which 
the taxpayer could reasonably have been expected to satisfy such 
condition.

For purposes of subdivision (i) of this paragraph disability shall be 
determined according to the rules in section 72(m)(7) and Sec. 1.72-
17(f). Subdivision (ii) of this subparagraph applies only where the 
taxpayer has obtained full-time employment in which he could reasonably 
have been expected to satisfy the minimum period of employment 
condition. A taxpayer could reasonably have been expected to satisfy the 
minimum period of employment condition if at the time he commences work 
at the new principal place of work he could have been expected, based 
upon the facts known to him at such time, to satisfy such condition. 
Thus, for example, if the taxpayer at the time of transfer was not 
advised by his employer that he planned to transfer him within 6 months 
to another principal place of work, the taxpayer could, in the absence 
of other factors, reasonably have been expected to satisfy the minimum 
employment period condition at the time of the first transfer. On the 
other hand, a taxpayer could not reasonably have been expected to 
satisfy the minimum employment condition if at the time of the 
commencement of the move he knew that his employer's retirement age 
policy would prevent his satisfying the

[[Page 374]]

minimum employment period condition.
    (2) Election of deduction before minimum period of employment 
condition is satisfied. (i) Paragraph (2) of section 217(d) provides a 
rule which applies where a taxpayer paid or incurred, in a taxable year, 
moving expenses which would be deductible in that taxable year except 
that the minimum period of employment condition of section 217(c)(2) has 
not been satisfied before the time prescribed by law for filing the 
return for such taxable year. The rule provides that where a taxpayer 
has paid or incurred moving expenses and as of the date prescribed by 
section 6072 for filing his return for such taxable year (determined 
with regard to extensions of time for filing) there remains unexpired a 
sufficient portion of the 12-month or the 24-month period so that it is 
still possible for the taxpayer to satisfy the applicable period of 
employment condition, the taxpayer may elect to claim a deduction for 
such moving expenses on the return for such taxable year. The election 
is exercised by taking the deduction on the return.
    (ii) Where a taxpayer does not elect to claim a deduction for moving 
expenses on the return for the taxable year in which such expenses were 
paid or incurred in accordance with subdivision (i) of this subparagraph 
and the applicable minimum period of employment condition of section 
217(c)(2) (as well as all other requirements of section 217) is 
subsequently satisfied, the taxpayer may file an amended return or a 
claim for refund for the taxable year such moving expenses were paid or 
incurred on which he may claim a deduction under section 217.
    (iii) The application of this subparagraph may be illustrated by the 
following examples:

    Example 1. A is transferred by his employer from Boston, MA, to 
Cleveland, OH. He begins working there on November 1, 1970. Moving 
expenses are paid by A in 1970 in connection with this move. On April 
15, 1971, when he files his income tax return for the year 1970, A has 
been a full-time employee in Cleveland for approximately 24 weeks. 
Although he has not satisfied the 39-week employment condition at this 
time, A may elect to claim his 1970 moving expenses on his 1970 income 
tax return as there is still sufficient time remaining before November 
1, 1971, to satisfy such condition.
    Example 2. Assume the same facts as in Example 1, except that on 
April 15, 1971, A has voluntarily left his employer and is looking for 
other employment in Cleveland. A may not be sure he will be able to meet 
the 39-week employment condition by November 1, 1971. Thus, he may if he 
wishes wait until such condition is met and file an amended return 
claiming as a deduction the expenses paid in 1970. Instead of filing an 
amended return A may file a claim for refund based on a deduction for 
such expenses. If A fails to meet the 39-week employment condition on or 
before November 1, 1971, no deduction is allowable for such expenses.
    Example 3. B is a self-employed accountant. He moves from Rochester, 
NY, to New York, NY, and begins to work there on December 1, 1970. 
Moving expenses are paid by B in 1970 and 1971 in connection with this 
move. On April 15, 1971, when he files his income tax return for the 
year 1970, B has been performing services as a self-employed individual 
on a full-time basis in New York City for approximately 20 weeks. 
Although he has not satisfied the 78-week employment condition at this 
time, A may elect to claim his 1970 moving expenses on his 1970 income 
tax return as there is still sufficient time remaining before December 
1, 1972, to satisfy such condition. On April 15, 1972, when he files his 
income tax return for the year 1971, B has been performing services as a 
self-employed individual on a full-time basis in New York City for 
approximately 72 weeks. Although he has not met the 78-week employment 
condition at this time, B may elect to claim his 1971 moving expenses on 
his 1971 income tax return as there is still sufficient time remaining 
before December 1, 1972, to satisfy such requirement.

    (3) Recapture of deduction. Paragraph (3) of section 217(d) provides 
a rule which applies where a taxpayer has deducted moving expenses under 
the election provided in section 217(d)(2) prior to satisfying the 
applicable minimum period of employment condition and such condition 
cannot be satisfied at the close of a subsequent taxable year. In such 
cases an amount equal to the expenses deducted must be included in the 
taxpayer's gross income for the taxable year in which the taxpayer is no 
longer able to satisfy such minimum period of employment condition. 
Where the taxpayer has deducted moving expenses under the election 
provided in section 217(d)(2) for the taxable year and subsequently 
files an amended return for such year on which he does not claim the 
deduction, such

[[Page 375]]

expenses are not treated as having been deducted for purposes of the 
recapture rule of the preceding sentence.
    (e) Denial of double benefit--(1) In general. Section 217(e) 
provides a rule for computing the amount realized and the basis where 
qualified real estate expenses are allowed as a deduction under section 
217(a).
    (2) Sale or exchange of residence. Section 217(e) provides that the 
amount realized on the sale or exchange of a residence owned by the 
taxpayer, by the taxpayer's spouse, or by the taxpayer and his spouse 
and used by the taxpayer as his principal place of residence is not 
decreased by the amount of any expenses described in subparagraph (A) of 
section 217(b)(2) and deducted under section 217(a). For the purposes of 
section 217(e) and of this paragraph the term amount realized'' has the 
same meaning as under section 1001(b) and the regulations thereunder. 
Thus, for example, if the taxpayer sells a residence used as his 
principal place of residence and real estate commissions or similar 
expenses described in subparagraph (A) of section 217(b)(2) are deducted 
by him pursuant to section 217(a), the amount realized on the sale of 
the residence is not reduced by the amount of such real estate 
commissions or such similar expenses described in subparagraph (A) of 
section 217(b)(2).
    (3) Purchase of a residence. Section 217(e) provides that the basis 
of a residence purchased or received in exchange for other property by 
the taxpayer, by the taxpayer's spouse, or by the taxpayer and his 
spouse and used by the taxpayer as his principal place of residence is 
not increased by the amount of any expenses described in subparagraph 
(B) of section 217(b)(2) and deducted under section 217(a). For the 
purposes of section 217(e) and of this paragraph the term basis has the 
same meaning as under section 1011 and the regulations thereunder. Thus, 
for example, if a taxpayer purchases a residence to be used as his 
principal place of residence and attorneys' fees or similar expenses 
described in subparagraph (B) of section 217(b)(2) are deducted pursuant 
to section 217(a), the basis of such residence is not increased by the 
amount of such attorneys' fees or such similar expenses described in 
subparagraph (B) of section 217(b)(2).
    (4) Inapplicability of section 217(e). (i) Section 217(e) and 
subparagraphs (1) through (3) of this paragraph do not apply to any 
expenses with respect to which an amount is included in gross income 
under section 217(d)(3). Thus, the amount of any expenses described in 
subparagraph (A) of section 217(b)(2) deducted in the year paid or 
incurred pursuant to the election under section 217(d)(2) and 
subsequently recaptured pursuant to section 217(d)(3) may be taken into 
account in computing the amount realized on the sale or exchange of the 
residence described in such subparagraph. Also, the amount of expenses 
described in subparagraph (B) of section 217(b)(2) deducted in the year 
paid or incurred pursuant to such election under section 217(d)(2) and 
subsequently recaptured pursuant to section 217(d)(3) may be taken into 
account as an adjustment to the basis of the residence described in such 
subparagraph.
    (ii) The application of subdivision (i) of this subparagraph may be 
illustrated by the following examples:

    Example 1. A was notified of his transfer effective December 15, 
1972, from Seattle, WA, to Philadelphia, PA. In connection with the 
transfer A sold his house in Seattle on November 10, 1972. Expenses 
incident to the sale of the house of $2,500 were paid by A prior to or 
at the time of the closing of the contract of sale on December 10, 1972. 
The amount realized on the sale of the house was $47,500 and the 
adjusted basis of the house was $30,000. Pursuant to the election 
provided in section 217(d)(2), A deducted the expenses of moving from 
Seattle to Philadelphia including the expenses incident to the sale of 
his former residence in taxable year 1972. Dissatisfied with his 
position with his employer in Philadelphia, A took a position with an 
employer in Chicago, IL, on July 15, 1973. Since A was no longer able to 
satisfy the minimum period employment condition at the close of taxable 
year 1973 he included an amount equal to the amount deducted as moving 
expenses including the expenses incident to the sale of his former 
residence in gross income for taxable year 1973. A is permitted to 
decrease the amount realized on the sale of the house by the amount of 
the expenses incident to the sale of the house deducted from gross 
income and subsequently included in gross income. Thus, the amount 
realized on the sale of the house is decreased from $47,500 to $45,000 
and thus, the gain on the

[[Page 376]]

sale of the house is reduced from $17,500 to $15,000. A is allowed to 
file an amended return or a claim for refund in order to reflect the 
recomputation of the amount realized.
    Example 2. B, who is self-employed decided to move from Washington, 
DC, to Los Angeles, CA. In connection with the commencement of work in 
Los Angeles on March 1, 1973, B purchased a house in a suburb of Los 
Angeles for $65,000. Expenses incident to the purchase of the house in 
the amount of $1,500 were paid by B prior to or at the time of the 
closing of the contract of sale on September 15, 1973. Pursuant to the 
election provided in section 217(d)(2), B deducted the expenses of 
moving from Washington to Los Angeles including the expenses incident to 
the purchase of his new residence in taxable year 1973. Dissatisfied 
with his prospects in Los Angeles, B moved back to Washington on July 1, 
1974. Since B was no longer able to satisfy the minimum period of 
employment condition at the close of taxable year 1974 he included an 
amount equal to the amount deducted as moving expenses incident to the 
purchase of the former residence in gross income for taxable year 1974. 
B is permitted to increase the basis of the house by the amount of the 
expenses incident to the purchase of the house deducted from gross 
income and subsequently included in gross income. Thus, the basis of the 
house is increased to $66,500.

    (f) Rules for self-employed individuals--(1) Definition. Section 
217(f)(1) defines the term self-employed individual for purposes of 
section 217 to mean an individual who performs personal services either 
as the owner of the entire interest in an unincorporated trade or 
business or as a partner in a partnership carrying on a trade or 
business. The term self-employed individual does not include the 
semiretired, part-time students, or other similarly situated taxpayers 
who work only a few hours each week. The application of this 
subparagraph may be illustrated by the following example:

    Example. A is the owner of the entire interest in an unincorporated 
construction business. A hires a manager who performs all of the daily 
functions of the business including the negotiation of contracts with 
customers, the hiring and firing of employees, the purchasing of 
materials used on the projects, and other similar services. A and his 
manager discuss the operations of the business about once a week over 
the telephone. Otherwise A does not perform any managerial services for 
the business. For the purposes of section 217, A is not considered to be 
a self-employed individual.

    (2) Rule for application of subsection (b)(1) (C) and (D). Section 
217(f)(2) provides that for purposes of subparagraphs (C) and (D) of 
section 217(b)(1) an individual who commences work at a new principal 
place of work as a self-employed individual is treated as having 
obtained employment when he has made substantial arrangements to 
commence such work. Whether the taxpayer has made substantial 
arrangements to commence work at a new principal place of work is 
determined on the basis of all the facts and circumstances in each case. 
The factors to be considered in this determination depend upon the 
nature of the taxpayer's trade or business and include such 
considerations as whether the taxpayer has: (i) Leased or purchased a 
plant, office, shop, store, equipment, or other property to be used in 
the trade or business, (ii) made arrangements to purchase inventory or 
supplies to be used in connection with the operation of the trade or 
business, (iii) entered into commitments with individuals to be employed 
in the trade or business, and (iv) made arrangements to contact 
customers or clients in order to advertise the business in the general 
location of the new principal place of work. The application of this 
subparagraph may be illustrated by the following examples:

    Example 1. A, a partner in a growing chain of drug stores decided to 
move from Houston, TX, to Dallas, TX, in order to open a drug store in 
Dallas. A made several trips to Dallas for the purpose of looking for a 
site for the drug store. After the signing of a lease on a building in a 
shopping plaza, suppliers were contacted, equipment was purchased, and 
employees were hired. Shortly before the opening of the store A and his 
wife moved from Houston to Dallas and took up temporary quarters in a 
motel until the time their apartment was available. By the time he and 
his wife took up temporary quarters in the motel A was considered to 
have made substantial arrangements to commence work at the new principal 
place of work.
    Example 2. B, who is a partner in a securities brokerage firm in New 
York, NY, decided to move to Rochester, NY, to become the resident 
partner in the firm's new Rochester office. After a lease was signed on 
an office in downtown Rochester B moved to Rochester and took up 
temporary quarters

[[Page 377]]

in a motel until his apartment became available. Before the opening of 
the office B supervised the decoration of the office, the purchase of 
equipment and supplies necessary for the operation of the office, the 
hiring of personnel for the office, as well as other similar activities. 
By the time B took up temporary quarters in the motel he was considered 
to have made substantial arrangements to commence to work at the new 
principal place of work.
    Example 3. C, who is about to complete his residency in 
ophthalmology at a hospital in Pittsburgh, PA, decided to fly to 
Philadelphia, PA, for the purpose of looking into opportunities for 
practicing in that city. Following his arrival in Philadelphia C decided 
to establish his practice in that city. He leased an office and an 
apartment. At the time he departed Pittsburgh for Philadelphia C was not 
considered to have made substantial arrangements to commence work at the 
new principal place of work, and, therefore, is not allowed to deduct 
expenses described in subparagraph (C) of section 217(b)(1) (relating to 
expenses of traveling (including meals and lodging), after obtaining 
employment, from the former residence to the general location of the new 
principal place of work and return, for the principal purpose of 
searching for a new residence).

    (g) Rules for members of the Armed Forces of the United States--(1) 
In general. The rules in paragraphs (a)(1) and (2), (b), and (e) of this 
section apply to moving expenses paid or incurred by members of the 
Armed Forces of the United States on active duty who move pursuant to a 
military order and incident to a permament change of station, except as 
provided in this paragraph (g). However, if the moving expenses are not 
paid or incurred incident to a permanent change of station, this 
paragraph (g) does not apply, but all other paragraphs of this section 
do apply. The provisions of this paragraph apply to taxable years 
beginning December 31, 1975.
    (2) Treatment of services or reimbursement provided by Government--
(i) Services in kind. The value of any moving or storage services 
furnished by the United States Government to members of the Armed 
Forces, their spouses, or their dependents in connection with a 
permanent change of station is not includible in gross income. The 
Secretary of Defense and (in cases involving members of the peacetime 
Coast Guard) the Secretary of Transportation are not required to report 
or withhold taxes with respect to those services. Services furnished by 
the Government include services rendered directly by the Government or 
rendered by a third party who is compensated directly by the Government 
for the services.
    (ii) Reimbursements. The following rules apply to reimbursements or 
allowances by the Government to members of the Armed Forces, their 
spouses, or their dependents for moving or storage expenses paid or 
incurred by them in connection with a permanent change of station. If 
the reimbursement or allowance exceeds the actual expenses paid or 
incurred, the excess is includible in the gross income of the member, 
and the Secretary of Defense or Secretary of Transportation must report 
the excess as payment of wages and withhold income taxes under section 
3402 and the employee taxes under section 3102 with respect to that 
excess. If the reimbursemet or allowance does not exceed the actual 
expenses, the reimbursement or allowance in not includible in gross 
income, and no reporting or withholding by the Secretary of Defense or 
Secretary of Transportation is required. If the actual expenses, as 
limited by paragraph (b)(9) of this section, exceed the reimbursement of 
allowance, the member may deduct the excess if the other requirements of 
this section, as modified by this paragraph, are met. The determination 
of the limitation on actual expenses under paragraph (b)(9) of this 
section is made without regard to any services in kind furnished by the 
Government.
    (3) Permanent change of station. For purposes of this section, the 
term permanent change of station includes the following situations.
    (i) A move from home to the first post of duty when appointed, 
reappointed, reinstated, or inducted.
    (ii) A move from the last post of duty to home or a nearer point in 
the United States in connection with retirement, discharge, resignation, 
separation under honorable conditions, transfer, relief from active 
duty, temporary disability retirement, or transfer to a Fleet Reserve, 
if such move occurs within 1 year of such termination of

[[Page 378]]

active duty or within the period prescribed by the Joint Travel 
Regulations promulgated under the authority contained in sections 404 
through 411 of Title 37 of the United States Code.
    (iii) A move from one permanent post of duty to another permanent 
post of duty at a different duty station, even if the member separates 
from the Armed Forces immediately or shortly after the move.

The term permanent, post of duty, duty station, and honorable have the 
meanings given them in appropriate Department of Defense or Department 
of Transportation rules and regulations.
    (4) Storage expenses. This paragraph applies to storage expenses as 
well as to moving expenses described in paragraph (b)(1) of this 
section. the term storage expenses means the cost of storing personal 
effects of members of the Armed Forces, their spouses, and their 
dependents.
    (5) Moves of spouses and dependents. (i) The following special rule 
applies for purposes of paragraphs (b)(9) and (10) of this section, if 
the spouse or dependents of a member of the Armed Forces move to or from 
a different location than does the member. In this case, the spouse is 
considered to have commenced work as an employee at a new principal 
place of work that is within the same general location as the location 
to which the member moves.
    (ii) The following special rule applies for purposes of this 
paragraph to moves by spouses or dependents of members of the Armed 
Forces who die, are imprisoned, or desert while on active duty. In these 
cases, a move to a member's place of enlistment or induction or the 
member's, spouse's, or dependent's home of record or nearer point in the 
United States is considered incident to a permanent change of station.
    (6) Disallowance of deduction. No deduction is allowed under this 
section for any moving or storage expense reimbursed by an allowance 
that is excluded from gross income.
    (h) Special rules for foreign moves--(1) Increase in limitations. In 
the case of a foreign move (as defined in paragraph (h)(3) of this 
section), paragraph (b)(6) of this section shall be applied by 
substituting ``90 consecutive'' for ``30 consecutive'' each time it 
appears. Paragraph (b)(9) (ii), (iii) and (v) of this section shall be 
applied by substituting ``$6,000'' for ``$3,000'' each time it appears 
and by substituting ``$4,500'' for ``$1,500'' each time it appears. 
Paragraph (b)(9)(ii) of this section shall be applied by substituting 
``$5,000'' for ``$2,000'' each time it appears and by substituting 
``1979'' for ``1977'' and ``1980'' for ``1978'' each time they appear in 
the last sentence. Paragraph (b)(9)(v) of this section shall be applied 
by substituting ``$2,250'' for ``$750'' each time it appears. Paragraph 
(b)(9)(vi) of this section does not apply.
    (2) Allowance of certain storage fees. In the case of a foreign 
move, for purposes of this section, the moving expenses described in 
paragraph (b)(3) of this section shall include the reasonable expenses 
of moving household goods and personal effects to and from storage, and 
of storing such goods and effects for part or all of the period during 
which the new place of work continues to be the taxpayer's principal 
place of work.
    (3) Foreign move. For purposes of this paragraph, the term foreign 
move means a move in connection with the commencement of work by the 
taxpayer at a new principal place of work located outside the United 
States. Thus, a move from the United States to a foreign country or from 
one foreign country to another foreign country qualifies as a foreign 
move. A move within a foreign country also qualifies as a foreign move. 
A move from a foreign country to the United States does not qualify as a 
foreign move.
    (4) United States. For purposes of this paragraph, the term United 
States includes the possessions of the United States.
    (5) Effective date. The provisions of this paragraph apply to 
expenses paid or incurred in taxable years beginning after December 31, 
1978. The paragraph also applies to the expenses paid or incurred in the 
taxable year beginning during 1978 of taxpayers who do not make an 
election pursuant to section 209(c) of the Foreign Earned Income Act of 
1978 (Pub. L. 95-615, 92 Stat. 3109) to have section 911 under prior law 
apply to that taxable year.
    (i) Allowance of deductions in case of retirees or decedents who 
were working

[[Page 379]]

abroad--(1) In general. In the case of any qualified retiree moving 
expenses or qualified survivor moving expenses, this section (other than 
paragraph (h)) shall be applied to such expenses as if they were 
incurred in connection with the commencement of work by the taxpayer as 
an employee at a new principal place of work located within the United 
States and the limitations of paragraph (c)(4) of this section (relating 
to the minimum period of employment) shall not apply.
    (2) Qualified retiree moving expenses. For purposes of this 
paragraph, the term qualified retiree moving expenses means any moving 
expenses which are incurred by an individual whose former principal 
place of work and former residence were outside the United States and 
which are incurred for a move to a new residence in the United States in 
connection with the bona fide retirement of the individual. Bona fide 
retirement means the permanent withdrawal from gainful full-time 
employment and self-employment. An individual who at the time of 
withdrawal from gainful full-time employment or self-employment, intends 
the withdrawal to be permanent shall be considered to be a bona fide 
retiree even though the individual ultimately resumes gainful full-time 
employment or self-employment. An individual's intention may be 
evidenced by relevant facts and circumstances which include the age and 
health of the individual, the customary retirement age of employees 
engaged in similar work, whether the individual is receiving a 
retirement allowance under a pension annuity, retirement or similar fund 
or system, and the length of time before resuming full-time employment 
or self-employment.
    (3) Qualified survivor moving expenses. (i) For purposes of this 
paragraph, the term qualified survivor moving expenses means any moving 
expenses:
    (A) Which are paid or incurred by the spouse or any dependent (as 
defined in section 152) of any decedent who (as of the time of his 
death) had a principal place of work outside the United States, and
    (B) Which are incurred for a move which begins within 6 months after 
the death of the decedent and which is to a residence in the United 
States from a former residence outside the United States which (as of 
the time of the decedent's death) was the residence of such decedent and 
the individual paying or incurring the expense.
    (ii) For purposes of paragraph (i)(3) (i) (B) of this section, a 
move begins when:
    (A) The taxpayer contracts for the moving of his or her household 
goods and personal effects to a residence in the United States but only 
if the move is completed within a reasonable time thereafter;
    (B) The taxpayer's household goods and personal effects are packed 
and in transit to a residence in the United States; or
    (C) The taxpayer leaves the former residence to travel to a new 
place of residence in the United States.
    (4) United States. For purposes of this paragraph, the term United 
States includes the possessions of the United States.
    (5) Effective date. The provisions of this paragraph apply to 
expenses paid or incurred in taxable years beginning after December 31, 
1978. The paragraph also applies to the expenses paid or incurred in the 
taxable year beginning during 1978 of taxpayers who do not make an 
election pursuant to section 209(c) of the Foreign Earned Income Act of 
1978 (Pub. L. 95-615, 92 Stat. 3109) to have section 911 under prior law 
apply to that taxable year.
    (j) Effective date--(1) In general. This section, except as provided 
in subparagraphs (2) and (3) of this paragraph, is applicable to items 
paid or incurred in taxable years beginning after December 31, 1969.
    (2) Reimbursement not included in gross income. This section does 
not apply to items to the extent that the taxpayer received or accrued 
in a taxable year beginning before January 1, 1970, a reimbursement or 
other expense allowance for such items which was not included in his 
gross income.
    (3) Election in cases of expenses paid or incurred before January 1, 
1971, in connection with certain moves--(i) In general. A taxpayer who 
was notified by his employer on or before December 19, 1969, of a 
transfer to a new principal place of work and who pays or incurs moving 
expenses after December 31,

[[Page 380]]

1969, but before January 1, 1971, in connection with such transfer may 
elect to have the rules governing moving expenses in effect prior to the 
effective date of section 231 of the Tax Reform Act of 1969 (83 Stat. 
577) govern such expenses. If such election is made, this section and 
section 82 and the regulations thereunder do not apply to such expenses. 
A taxpayer is considered to have been notified on or before December 19, 
1969, by his employer of a transfer, for example, if before such date 
the employer has sent a notice to all employees or a reasonably defined 
group of employees, which includes such taxpayer, of a relocation of the 
operations of such employer from one plant or facility to another plant 
or facility. An employee who is transferred to a new principal place of 
work for the benefit of his employer and who makes an election under 
this paragraph is permitted to exclude amounts received or accrued, 
directly or indirectly, as payment for or reimbursement of expenses of 
moving household goods and personal effects from the former residence to 
the new residence and of traveling (including meals and lodging) from 
the former residence to the new place of residence. Such exclusion is 
limited to amounts received or accrued, directly or indirectly, as a 
payment for or reimbursement of the expenses described above. Amounts in 
excess of actual expenses paid or incurred must be included in gross 
income. No deduction is allowable under section 217 for expenses 
representing amounts excluded from gross income. Also, an employee who 
is transferred to a new principal place of work which is less than 50 
miles but at least 20 miles farther from his former residence than was 
his former principal place of work and who is not reimbursed, either 
directly or indirectly, for the expenses described above is permitted to 
deduct such expenses providing all of the requirements of section 217 
and the regulations thereunder prior to the effective date of section 
231 of the Tax Reform Act of 1969 (83 Stat. 577) are satisfied.
    (ii) Election made before the date of publication of this notice as 
a Treasury decision. An election under this subparagraph made before the 
date of publication of this notice as a Treasury decision shall be made 
pursuant to the procedure prescribed in temporary income tax regulations 
relating to treatment of payments of expenses of moving from one 
residence to another residence (Part 13 of this chapter) T.D. 7032 (35 
FR 4330), approved Mar. 11, 1970.
    (iii) Election made on or after the date of publication of this 
notice as a Treasury decision. An election made under this subparagraph 
on or after the date of publication of this notice as a Treasury 
decision shall be made not later than the time, including extensions 
thereof, prescribed by law for filing the income tax return for the year 
in which the expenses were paid or 30 days after the date of publication 
of this notice as a Treasury decision, whichever occurs last. The 
election shall be made by a statement attached to the return (or the 
amended return) for the taxable year, setting forth the following 
information:
    (a) The items to which the election relates;
    (b) The amount of each item;
    (c) The date each item was paid or incurred; and
    (d) The date the taxpayer was informed by his employer of his 
transfer to the new principal place of work.
    (iv) Revocation of election. An election made in accordance with 
this subparagraph is revocable upon the filing by the taxpayer of an 
amended return or a claim for refund with the district director, or the 
director of the Internal Revenue service center with whom the election 
was filed not later than the time prescribed by law, including 
extensions thereof, for the filing of a claim for refund with respect to 
the items to which the election relates.

[T.D. 7195, 37 FR 13535, July 11, 1972, 37 FR 14230, July 18, 1972 as 
amended by T.D. 7578 43 FR 59355, Dec. 20, 1978; T.D. 7605, 44 FR 18970, 
Mar. 30, 1979; T.D. 7689, 45 FR 20796, Mar. 31, 1980; T.D. 7810, 47 FR 
6003, Feb. 10, 1982; T.D. 8607, 60 FR 40077, Aug. 7, 1995]