Posted by: Cory Stigile | February 13, 2021

Where is My “Tax Home” or Residency in a Post-COVID World? By Cory Stigile

In Soboyede v. Comm’r, T.C., T.C. Summary Opinion 2021-3, the Tax Court addressed whether the taxpayer’s travel expenses while performing legal work in Washington were incurred “while away from home” such that they could be deducted as ordinary and necessary travel expenses under IRC Section 162.   While this is a non-precedential opinion, it is a helpful preview of the many issues return preparers will face in filing 2020 and 2021 tax returns as taxpayers work remotely in the post-COVID world.

In Soboyede, the taxpayer performed document review work as an attorney.  Aside from traveling to Nigeria for almost two months, he spent at least 161 days in Washington D.C. and 115 days in Minnesota during 2015.  Soboyede earned over twice as much revenues conducting work in Washington D.C. than he did in Minnesota during the year at issue.  For purposes of section 162(a)(2), “tax home” generally “means the vicinity of the taxpayer’s principal place of employment [or business] and not where his or her personal residence is located.”  There is also an exception to this rule if the working location is “temporary” in a particular year.  The taxpayer introduced several exhibits in trying to establish that he had a greater presence in Minnesota, but his documentation contained “materials gaps in time that ranged from days to weeks.”  Ultimately, the Tax Court determined that Washington D.C. was his tax home and he could not deduct rent or hotel expenses while staying there.  The Tax Court reached this conclusion, even though he also paid “office rent” in Minneapolis and resided there when he filed his Petition with the Tax Court.

Separate from the issue of business expenses paid for “away from home travel,” several other federal and state tax provisions may be implicated as people adjust to COVID circumstances by remote working, working (and schooling your children) from a vacation home (or Airbnb residence), living with family, or other unique COVID working arrangements.

States are already fighting over how they may tax workers within and without their states during COVID. For instance, New Hampshire recently filed a Petition to the Supreme Court for leave to file an action challenging Massachusetts’s taxation of New Hampshire residents who work remotely from their homes for Massachusetts businesses.  Several other states have also filed  amicus curiae briefs urging the court to grant the motion.   As described by Counsel for New Hampshire,

In the middle of a global pandemic, Massachusetts has taken deliberate aim at the New Hampshire Advantage by purporting to impose Massachusetts income tax on New Hampshire residents for income earned while working within New Hampshire. Upending decades of consistent practice, Massachusetts now taxes income earned entirely outside its borders. Through its unprecedented action, Massachusetts has unilaterally imposed an income tax within New Hampshire that New Hampshire, in its sovereign discretion, has deliberately chosen not to impose.

This blog does not address the consequences of Massachusetts’s tax regime, or “sourcing” regimes in other states, but states will certainly evaluate how they should tax persons working in their states.

Finally, the “Big One” is how tax agencies in high-tax states will evaluate COVID-related habitations when conducting state residency audits.  A growing list of significant taxpayers and their businesses are moving from high income tax states to states with low or no income tax.  While taxpayers from California, for instance, may have intended to permanently change their domicile to a different state in 2020, the facts and circumstances may make it appear that the stay is temporary or transitory.  Perhaps a taxpayer visited with family in another state for a temporary childcare purpose, or they sought to put their kids in full time school for a school year, or some other temporary reason.  Normally, moving to a different state and putting your children in school or daycare in the state where you move to is a factor that supports a taxpayer claim to have permanently left California and taken up residence elsewhere.  Unique COVID-related facts may result in these facts being reviewed with a different perspective.  Similarly, taxpayers may experience a split year, as was the case in Soboyede, where they lived with family or a loved one in California for a significant part of the year, even though they did not plan for California to be their residence for the year.  Unlike the “tax home” requirements under IRC Section 162, California places significant weight on the  number of days stayed in California, as well as several other facts and circumstances, in determining the taxpayer’s subjective intent for being in, or moving out of, California.

As the taxpayer learned in Soboyede, record keeping can be critical when it comes to proving residency or “tax home” during an audit or subsequent litigation.  Taxpayers should carefully retain records to document where they spend time during years when residency may become an issue.  COVID poses additional challenges.  For instance, it may be difficult to sell a residence when establishing a new domicile, or to complete a remodel of a home.  Even getting a new Driver’s License could present difficulties in 2020 or 2021.  While many people are figuring out which way is up in these unique times, in the future tax agencies will have the benefit of hindsight when applying residency rules.  Representatives may need to distinguish facts unique to the pandemic in order to get a fair result for their clients. 

As returns are prepared for these tax years, taxpayers should provide all available information to their advisors and consult with them early.  They should also consider disclosing positions on their tax returns, and consider filing non-resident tax returns with disclosures, even if the taxpayer arguably had no income sourced to the state, so that the taxing agencies can see the basis for the positions, and also so that the statute of limitations can begin on those returns.

CORY STIGILE – For more information please contact Cory Stigile –  Mr. Stigile is a principal at Hochman Salkin Toscher Perez P.C., a CPA licensed in California, the past-President of the Los Angeles Chapter of CalCPA and a Certified Specialist in Taxation Law by The State Bar of California, Board of Legal Specialization.  His representation includes Federal and state controversy matters and tax litigation, including sensitive tax-related examinations and investigations for individuals, business enterprises, partnerships, limited liability companies, and corporations. His practice also includes complex civil tax examinations. Additional information is available at


  1. […] were in solely because the pandemic forced them to reside within that state? This is a question the tax court will grapple with throughout […]

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