Sch C used part of house & retail space

[AZ-Tax]

Acquired a new client that is self employed using part of her owned home for business plus paid rent for a retail space. 2008 tax return has form 8829 but NO depreciation for her home and yes there is a "net profit" on line 31 Sch C. Due to also having retail space, is the self employed restricted from depreciating her portion of her house she also used for her business?

[solomon]

What does client do at home that could not be done at retail location?

[appelman]

I don't think having outside retail space is relevant,

I don't think having outside retail space is relevant, so long as the requirements for claiming business use of home are met.

[solomon]

I don't think having outside retail space is relevant, so long as the requirements for claiming business use of home are met.

Please cite the requirements.

[AZ-Tax]

A CPA prepared prior tax returns...

for this newly acquired client. Seems to me I need to do 1 of 2 things:

1. Amend and delete home office deduction.

2. Add depreciation of home office on form 8829 under the IRS rule "if its allowed to be depreciated, then the IRS sees it as it was depreciated regardless if it was or not".

I recall hearing the #2 at both at a regular tax seminar and IRS seminar and I have an email from the IRS confirming #2 does exist with the IRS.

[solomon]

for this newly acquired client. Seems to me I need to do 1 of 2 things:

1. Amend and delete home office deduction.

2. Add depreciation of home office on form 8829 under the IRS rule "if its allowed to be depreciated, then the IRS sees it as it was depreciated regardless if it was or not".

I recall hearing the #2 at both at a regular tax seminar and IRS seminar and I have an email from the IRS confirming #2 does exist with the IRS.

You might want to check Form 3115.

[erchess]

Principal Place of Business

OP doesn't say what the business is but it seems more likely than not that the "retail space" is the principal place of business, that is, the place where the business makes its money. In order to be deductible a home office has to be the principal place of business or at least that is my understanding.

[Gene V]

Some quotes from Pub. 587

You can have more than one business location, including
your home, for a single trade or business.

Your home office will qualify as your Principal place of
business if you meet the following requirements.
•You use it exclusively and regularly for administra-
tive or management activities of your trade or busi-
ness.
•You have no other fixed location where you conduct
substantial administrative or management activities
of your trade or business.

[veritas]

My question is

what is the business purpose for using the home?

[MAJ]

Business Use...

Some quotes from Pub. 587

You can have more than one business location, including
your home, for a single trade or business.

Your home office will qualify as your Principal place of
business if you meet the following requirements.
•You use it exclusively and regularly for administra-
tive or management activities of your trade or busi-
ness.
•You have no other fixed location where you conduct
substantial administrative or management activities
of your trade or business.

We don't know the nature of the business yet. However, let's assume retail (clothing, hobbies, 7-11, almost does not matter). IF they are performing their daily administrative tasks at the home office, where the primary records are stored, then that's the answer, right? If it were me, with the cost of rent today, I'd rather dedicate as much floor space as possible to sales and forgoe the office at the retail space. They can't wait on customers and do administrative stuff all the time. Home makes more sense, less distraction, abile to see the family & keep the wife (or husband) happy as well.

Or, could be warehouse space where the goods are sold and they sell via EBay. Again, no office available and the only time it's used is to store and pick up the goods fore shipping.

Let's hear the full story before we quote scripture and assume different scenarios (you know, like I did!)...

However, one thing did catch my eye.. Is that true about the depreciation? it's assumed anyway??

[AZ-Tax]

Full Story

New client I acquired. Upon looking at her 2006 thru 2008 tax returns form 1040 Schedule C form 8829, I see 10% - 15% of the TP's house being used for her business as a "seamstress" but the bottom section of form 8829, home depreciation, was NOT completed on those same tax returns. The TP also had a retail space rented in those same tax years. The TP tells me her books, money, checks etc... are kept at TP's home for safekeeping and it helps keep business expenses down by not having to rent additional space. I think that was mentioned in one of the post. Can't blame the TP for trying to reduce business related expenses.

Is this TP allowed to even deduct her home office in addition to her retail space? If allowed would it be soley for the reason the house is the TP's "primary" place of business?

Assuming the home office sq ft is smaller then the retail space. Could the home office still be considered the TP's primary place of business?

[joanmcq]

Question is whether there is anywhere in the retail space to do the accounting, keep the books, manage the store. If she has an office there, no, she can't take a home office. If no, then she can.

Depreciation is required.

[veritas]

Does your client

store inventory in the home?

[solomon]

store inventory in the home?

That would not matter in this case because the dwelling is not the sole fixed business location.
§280A(c)(2)

Subsection (a) shall not apply to any item to the extent such item is allocable to space within the dwelling unit which is used on a regular basis as a storage unit for the inventory or product samples of the taxpayer held for use in the taxpayer’s trade or business of selling products at retail or wholesale, but only if the dwelling unit is the sole fixed location of such trade or business.

[veritas]

Dang it

Always some code section foils my plans.

Thanks for the clarification.