J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

12.6 The 78-Week Test for the Self-Employed and Partners

In addition to meeting the distance test (12.4), you must work full time in the area of the new business for at least 78 weeks during the 24 months immediately following your arrival, of which at least 39 weeks occur in the first 12 months. The full-time work requirement may prevent semi-retired hobbyists, students, or others who work only a few hours a week in self-employed trades or occupations from claiming the deduction.

You are considered to have obtained employment at a new principal place of work when you have made substantial arrangements to begin such work.

The time test is waived if disability or death prevents compliance.

Change of employee or self-employed status.

If you start work at a new location as an employee and then become self-employed before meeting the 39-week employee time test, you must meet the 78-week test. Time spent as an employee is counted along with the time spent self-employed in meeting the test.

If, during the first 12 months, you change from working as a self-employed person to working as an employee, you may qualify under the 39-week employee time test, provided you have 39 weeks of work as an employee. If you do not have 39 weeks as an employee in the first 12 months, you must meet the 78-week test.

Joint returns.

Where you file a joint return, you deduct moving expenses if either you or your spouse can satisfy the time test based on individual work records.