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Imagine I plot a course on a sectional chart. The straight line plotted reads a 345° course. The nearest isogonic line is 14° W (so +14°). Weather information calls for a wind correction of +2°. Since 345+14+2=1, my magnetic heading would then be 001°.
What course or heading am I to use for choosing my cruise altitude (considering the east/west rule)? Do I use the true course that I plotted on the sectional, the magnetic course, or the magnetic heading?
From 14 CFR 91.159, "VFR cruising altitude or flight level":
Except while holding in a holding pattern of 2 minutes or less, or while turning, each person operating an aircraft under VFR in level cruising flight more than 3,000 feet above the surface shall maintain the appropriate altitude or flight level prescribed below, unless otherwise authorized by ATC:
(a) When operating below 18,000 feet MSL and—
(1) On a magnetic course of zero degrees through 179 degrees, any odd thousand foot MSL altitude + 500 feet (such as 3,500, 5,500, or 7,500); or
(2) On a magnetic course of 180 degrees through 359 degrees, any even thousand foot MSL altitude + 500 feet (such as 4,500, 6,500, or 8,500).
The same is true for IFR flight: magnetic course determines IFR cruising altitudes. See 14 CFR 91.179, "IFR cruising altitude or flight level".
This is true under FAA regulations. ICAO regulations are similar, but reference magnetic track rather than magnetic course; for these purposes the two terms have the same meaning.
Johnathan nailed it from a regulatory standpoint but just to add a bit as to the "why". Keep in mind that your magnetic heading is only relevant to you in the aircraft. In regards to everyone else (other planes in the sky and ATC) you ground track is whats important as that is your direction of motion.
It is also important to note that magnetic heading is only true for a given set of conditions (the wind that day really). Ground track is generally constant between 2 points and thus can provide a better reference for controlling these kinds of things.
Magnetic track, or in polar areas at latitudes higher than 70 degrees and within such extensions to those areas as may be prescribed by the appropriate ATS authorities, grid tracks as determined by a network of lines parallel to the Greenwich Meridian superimposed on a polar stereographic chart in which the direction towards the North Pole is employed as the Grid North.
Source: ICAO Annex 2, Appendix 3
