Home office & mileage

[skhyatt]

Bold

No, it supports the position that it has to be a qualified home office. Section 280A(c)(1)(A) is part of the home office deduction requirements.

Well, when you put it in bold like that, how can I miss it? Let me ask this, IF a taxpayer qualifies for the home office deduction, but chooses not to take the deductions, for whatever reason, does merely qualifying for the deduction allow the mileage deduction? And, was that correct earlier, where if a TP doesn't qualify, then the first trip to client A would be commuting, then after that, A to B, etc would be deductible or is it just a lost deduction if no home office. It doesn't seem right that you would lose the entire deduction, if let's say you use the portion of the home office 1% of the time for personal reasons?

[JON]

You move the treadmill into your home office

You lose the office in the home, but not the auto deduction. You have to overcome having another office, but does not effect your auto deduction.

[Bees Knees]

Excerpts from Rev. Rul. 99-7, “Under what circumstances are daily transportation expenses incurred by a taxpayer in going between the taxpayer's residence and a work location deductible under section 162(a) of the Internal Revenue Code?”

“Section 280A(c)(1)(A) provides, in part, that a taxpayer may deduct expenses for the business use of the portion of the taxpayer's personal residence that is exclusively used on a regular basis as the principal place of business for any trade or business of the taxpayer.”

“Rev. Rul. 94-47 also states that the Service will not follow the decision in Walker v. Commissioner, 101 T.C. 537 (1993).”

“Finally, Rev. Rul. 94-47 amplifies Rev. Rul. 190 and Rev. Rul. 90-23 to provide that, if the taxpayer's residence is the taxpayer's principal place of business within the meaning of section 280A(c)(1)(A), the taxpayer may deduct daily transportation expenses incurred in going between the taxpayer's residence and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance.”

“If an office in the taxpayer's residence satisfies the principal place of business requirements of section 280A(c)(1)(A), then the residence is considered a business location for purposes of Rev. Rul. 90-23 or Rev. Rul. 94-47. In these circumstances, the daily transportation expenses incurred in going between the residence and other work locations in the same trade or business are ordinary and necessary business expenses (deductible under section 162(a)).”

“In contrast, if an office in the taxpayer's residence does not satisfy the principal place of business requirements of section 280A(c)(1)(A), then the business activity there (if any) is not sufficient to overcome the inherently personal nature of the residence and the daily transportation expenses incurred in going between the residence and regular work locations. In these circumstances, the residence is not considered a business location for purposes of Rev. Rul. 90-23 or Rev. Rul. 94-47, and the daily transportation expenses incurred in going between the residence and regular work locations are personal expenses (nondeductible under sections 1.162-2(e) and 1.262-1(b)(5)).”

[Bees Knees]

You lose the office in the home, but not the auto deduction. You have to overcome having another office, but does not effect your auto deduction.

The Rev Ruling says exclusive use. 1% personal is not exclusive use.

[Bees Knees]

Prop. Regs. Section 1.280A-2(b) USE AS
THE TAXPAYER'S PRINCIPAL PLACE OF BUSINESS--

(1) In general. Section 280A(c)(1)(A) provides an
exception to the general rule of section 280A(a) for
any item to the extent that the item is allocable to a
portion of the dwelling unit which is used exclusively
and on a regular basis as the principal place of
business for any trade or business of the taxpayer…

Prop. Regs. Section 1.280A-2(g) Exclusive use requirement--

(1) In general. Paragraph (b), (c), or (d) of this
section may apply to the use of a portion of a dwelling
unit for a taxable year only if there is no use of that
portion of the unit at any time during the taxable year
other than for business purposes.

[Bees Knees]

There is no doubt. The Rev. Ruling, the regs, and the code all agree that the term "principal place of business" within the meaning of Section 280A(c)(1)(A) is talking about an office in home used exclusively and on a regular basis for business. If you can't meet this requirement, then Rev. Rul. 99-7 says you can't deduct mileage from home to another business location.

[skhyatt]

But after leaving

There is no doubt. The Rev. Ruling, the regs, and the code all agree that the term "principal place of business" within the meaning of Section 280A(c)(1)(A) is talking about an office in home used exclusively and on a regular basis for business. If you can't meet this requirement, then Rev. Rul. 99-7 says you can't deduct mileage from home to another business location.

Ok, can't deduct from home to another business location, but what about after reaching the business location, then going to another. Home to client A, commuting, A to B business miles, etc.?

[skhyatt]

Found this

Example: "Frances does not have a regular place of business, nor does she have an office in her home. She leaves her home and visits several clients and then returns. The cost of travelling from her home to the first client and the cost of traveling from the last client back to her home is not deductible. The amount in between clients is deductible. If she had an office in her home, the entire trip would be deductible." CCH 1040 Express Answers, 8-3

[Bees Knees]

Frances ought to have an office in her home. Under the new rules, using it for administrative purposes, such as sending out bills, making appointments over the phone, and doing her bookkeeping qualifies as "a principal place of business."

The mileage deduction is why you need to advise all of your clients to set up and qualify for an office in home.

[Unregistered]

Look at the literal words the Rev Ruling provides:

"Finally, Rev. Rul. 94-47 amplifies Rev. Rul. 190 and Rev. Rul. 90-23 to provide that, if the taxpayer's residence is the taxpayer's principal place of business within the meaning of section 280A(c)(1)(A), the taxpayer may deduct daily transportation expenses incurred in going between the taxpayer's residence and another work location in the same trade or business, regardless of whether the other work location is regular or temporary and regardless of the distance.”

“If an office in the taxpayer's residence satisfies the principal place of business requirements of section 280A(c)(1)(A), then the residence is considered a business location for purposes of Rev. Rul. 90-23 or Rev. Rul. 94-47. In these circumstances, the daily transportation expenses incurred in going between the residence and other work locations in the same trade or business are ordinary and necessary business expenses (deductible under section 162(a)).”"

It says satisfies the rule for PRINCIPAL PLACE of business - a principal place of business does not require exclusive use - a home office deduction does. The ruling (if intended to require exclusive use) should have used section 280A(c). FWIW - I called the author of Rev Ruling 99-7 (this comment is obviously HEARSAY) about 2 years ago and he told me he agreed that you didn't need the exclusive use.

NY Enrolled Agent

[Bees Knees]

Wrong.

A principal place of business does have to be used exclusively for business. The revenue ruling said “within the meaning of Section 280A(c)(1)(A).”

The revenue ruling itself says “Section 280A(c)(1)(A) provides, in part, that a taxpayer may deduct expenses for the business use of the portion of the taxpayer's personal residence that is exclusively used on a regular basis as the principal place of business for any trade or business of the taxpayer.”

And Proposed Reg. Section 1.280A-2(b)(1) says “In general. Section 280A(c)(1)(A) provides an exception to the general rule of section 280A(a) for any item to the extent that the item is allocable to a portion of the dwelling unit which is used exclusively and on a regular basis as the principal place of business for any trade or business of the taxpayer…”

The term “principal place of business” as used in the revenue ruling can only apply if it meets the definition of the term at code section 280A(c)(1)(A).

If the revenue ruling just meant the principal place of business but did not require you to actually pass the office in home rules, then it would not have said “within the meaning of Section 280A(c)(1)(A)." You can’t say, the principal place of business according to my opinion, or the taxpayer’s opinion on where the principal place of business is. It has to be according to the definition provided at Section 280A(c)(1)(A).

[Bees Knees]

The ruling (if intended to require exclusive use) should have used section 280A(c).

The ruling itself does use Section 280A(c) and says exclusive use.


“Section 280A(c)(1)(A) provides, in part, that a taxpayer may deduct expenses for the business use of the portion of the taxpayer's personal residence that is exclusively used on a regular basis as the principal place of business for any trade or business of the taxpayer.”

What part of "that is exclusively used on a regular basis" do you not understand?

[Bees Knees]

FWIW - I called the author of Rev Ruling 99-7 (this comment is obviously HEARSAY) about 2 years ago and he told me he agreed that you didn't need the exclusive use.

Call him back and ask why he said exclusive use in the ruling if he did not mean exclusive use?

[Brad Imsdahl]

Bees,

Thank you for your enthusiasm, but both sides have valid points.

The term “exclusive use on a regular basis” is not found in Section 280A(c)(1)(A). It is found at Section 280A(c)(1).

Section 280A(c) EXCEPTIONS FOR CERTAIN BUSINESS OR RENTAL USE; LIMITATION ON DEDUCTIONS FOR
SUCH USE


(1) CERTAIN BUSINESS USE

Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis--

(A) as the principal place of business for any trade or business of the taxpayer,

(B) as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business, or

(C) in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer's trade or business.

Note that the exclusive and regular use tests is a separate definition set outside of Section 280A(c)(1)(A).

I think that is the point everyone is trying to make. The “principal place of business” part is its own thing, while the “exclusive and regular use” part is another thing.

When the revenue ruling and proposed regulations mention the exclusive and regular use requirements, do they say it in the context of the definition of a “principal place of business,” or do they say it in the context of being able to deduct office in home expenses when the home office is a principal place of business?

The answer seems to be unclear and is not specifically addressed in any ruling or court case.

[Bees Knees]

Brad,

Thank you for being diplomatic, but that doesn’t solve the issue.

Section 280A(c)(1)(A) is a continuation of the sentence started at Section 280A(c)(1). How can you suggest they are separate?

“Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis—(A) as the principal place of business for any trade or business of the taxpayer…”

“Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis—(B) as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business, or”

“Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis—(C) in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer's trade or business.”

All three rules start off with the same beginning sentence. You are picking and choosing portions of the sentence and breaking them into bits and pieces trying to get around a rule. Each sentence is complete. You cannot, for example, say a place to meet clients within the meaning of Section 280A(c)(1)(B) can apply to your dinning room table if you also eat lunch and dinner there. If you just mean a place to meet clients, why would you say “within the meaning of Section 280A(c)(1)(B)” if you don’t care about the exclusive and regular use requirement? That would be silly. If you don’t care about exclusive and regular use when you mention something, why cite the code that includes exclusive and regular use in the same sentence?