Depreciation

[peggysioux]

Taxpayer received a 1099 for in-home care for elderly person. The care was provided in taxpayer's residence. Took care of elderly person from January through September of 2012 and then elderly person got too sick and had to be placed in nursing home. I know that property that is placed in service and disposed of in same year should not be depreciated; however, if taxpayer had a home-office during the nine-month period, should the home office be depreciated?

[Burke]

Under the circumstances, I don't see where there is a OIH deduction at all. And TP should have received a W-2. Is the TP in the business of providing such care to others?

[FEDUKE404]

Likely a no go

Under the circumstances, I don't see where there is a OIH deduction at all. And TP should have received a W-2. Is the TP in the business of providing such care to others?

Agree on both counts!

Sounds like a W2 situation for the "employer" and the potential OIH is a r - e - a - l stretch!

What was the approximate dollar amount shown on the Form 1099-MISC? That might tell a lot!

(Does this caregiver also provide service to other similar clients, or even file a Schedule C?? - I doubt it!)

FE

[JohnH]

I think peggysioux is trying to justify depreciating a part of the client's residence because the care was provided there - she wants to use the Day Care Facility exception. The first hurdle to overcome is to determine if a license is required under state law, or if the client is exempt for some reason. The end result would be to reduce Schedule C income and save the income tax + SE tax. Right?

[peggysioux]

Depreciation

I think peggysioux is trying to justify depreciating a part of the client's residence because the care was provided there - she wants to use the Day Care Facility exception. The first hurdle to overcome is to determine if a license is required under state law, or if the client is exempt for some reason. The end result would be to reduce Schedule C income and save the income tax + SE tax. Right?

John, you are correct; I wanted to get feedback from other tax preparers. Taxpayer only handled the one client, but handled everything for that one client. Used home office to pay bills for client, handle all medical issues and make appts. for client using home office.

[peggysioux]

Depreciation

Agree on both counts!

Sounds like a W2 situation for the "employer" and the potential OIH is a r - e - a - l stretch!

What was the approximate dollar amount shown on the Form 1099-MISC? That might tell a lot!

(Does this caregiver also provide service to other similar clients, or even file a Schedule C?? - I doubt it!)

FE

The approximate dollar amount on 1099-MISC was $35,000 and taxpayer only took care of the one client.

[JohnH]

John, you are correct; I wanted to get feedback from other tax preparers. Taxpayer only handled the one client, but handled everything for that one client. Used home office to pay bills for client, handle all medical issues and make appts. for client using home office.

But if I understood your original post correctly, when you said "The care was provided in taxpayer's residence", I took that to mean that the patient resided in the taxpayer's home during the period of care. If that's the case then I think you can depreciate the property under the Day Care Facility rules. But if the patient resided elsewhere and the caregiver just took care of administrative details at home, I don't think the home office deduction will fly.

[peggysioux]

Depreciation

But if I understood your original post correctly, when you said "The care was provided in taxpayer's residence", I took that to mean that the patient resided in the taxpayer's home during the period of care. If that's the case then I think you can depreciate the property under the Day Care Facility rules. But if the patient resided elsewhere and the caregiver just took care of administrative details at home, I don't think the home office deduction will fly.

John, you are correct, the care was provided in the taxpayer's residence. I included the square footage of the elderly person's bedroom, bathroom and the office that the taxpayer used to handle administrative duties to determine the % of deductions. Taxpayer kept a very accurate log of places that he transported elderly person. So, even though the care was provided in home for less than one year, depreciation would still apply? Does the rule about asset being placed in service and disposed of in same year not qualifying for depreciation not come into play being asset wasn't disposed, but just no longer in use?