Tom Smith is married and has two children. He owned his home in
Detroit where he worked. On February 8, his employer told him that he
would be transferred to San Diego as of April 10 that year. His wife,
Peggy, flew to San Diego on March 1 to look for a new home. She put a
down payment of $25,000 on a house being built and came back to
Detroit on March 4. The Smiths sold their Detroit home for $1,500 less
than they paid for it. They contracted to have their personal effects
moved to San Diego on April 3. The family drove to San Diego where
they found that their new home was not finished. They stayed in a
nearby motel until the house was ready on May 1. On April 10, Tom went
to work in the San Diego plant where he still works.
His records for the move show:
| 1) |
Peggy's pre-move househunting trip: |
| Travel and lodging |
$ 449 |
| Meals |
75 |
$ 524 |
| 2) |
Down payment on San Diego home |
25,000 |
| 3) |
Real estate commission paid on sale of
Detroit
home |
3,500 |
| 4) |
Loss on sale of Detroit home (not including
real
estate commission) |
1,500 |
| 5) |
Amount paid for moving personal effects
(furniture, other household goods, etc.) |
8,000 |
| 6) |
Expenses of driving to San Diego: |
| Mileage (Start 14,278; End 16,478)
2,200 miles at 10 cents a mile |
$ 220 |
| Lodging |
180 |
| Meals |
320 |
720 |
| 7) |
Cost of temporary living expenses in San
Diego: |
| Motel rooms |
$1,450 |
| Meals |
2,280 |
3,730 |
| Total |
$42,974 |
Tom was reimbursed $10,599 under an accountable plan as follows:
| Moving personal effects |
$ 6,800 |
| Travel (and lodging) to San Diego |
400 |
| Travel (and lodging) for househunting trip |
449 |
| Lodging for temporary quarters |
1,450 |
| Loss on sale of home |
1,500 |
| Total reimbursement |
$10,599 |
Tom's employer gave him a breakdown of the amount of reimbursement.
The employer included this reimbursement on Tom's Form W-2
for the year. The reimbursement of deductible expenses, $7,200 ($6,800
+ $400) for moving household goods and travel to San Diego, was
included in box 13 of Form W-2. His employer identified this
amount with code P.
The employer included the balance, $3,399 reimbursement of
nondeductible expenses, in box 1 of Form W-2 with Tom's other
wages. He must include this amount on line 7 of Form 1040. The
employer withholds taxes from the $3,399, as discussed under
Nondeductible expenses, earlier. Also, Tom's employer could
have given him a separate Form W-2 for his moving reimbursement.
Tom figures his deduction for moving expenses as follows:
| Item 5, moving personal effects (line 1) |
$8,000 |
| Item 6, driving to San Diego ($220 + $180)
(line 2) |
400 |
| Total deductible moving expenses (line 3) |
$8,400 |
| Minus: Reimbursement included in box 13 of
Form W-2 (line 4) |
7,200 |
| Deduction for moving expenses (line
5) |
$1,200 |
Tom enters these amounts on Form 3903 to figure his deduction. His
Form 3903 and Distance Test Worksheet are shown later. He
also enters his deduction, $1,200, on line 26, Form 1040.
Nondeductible expenses.
Of the $42,974 expenses that Tom incurred, the following items
cannot be deducted.
- Item 1, pre-move househunting expenses.
- Item 2, the down payment on the San Diego home. If any part
of it were for payment of deductible taxes or interest on the mortgage
on the house, that part would be deductible as an itemized
deduction.
- Item 3, the real estate commission paid on the sale of the
Detroit home. The commission is used to figure the gain or loss on the
sale.
- Item 4, the loss on the sale of the Detroit home. The Smiths
cannot deduct it even though Tom's employer reimbursed him for
it.
- Item 6, the meals expenses while driving to San Diego.
(However, the lodging and car expenses are deductible.)
- Item 7, temporary living expenses.
Form 3903--Smith
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