Discussion:Auto expense from home
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Discussion Forum Index --> Basic Tax Questions --> Auto expense from home
Discussion Forum Index --> Tax Questions --> Auto expense from home
| 28 February 2008 | |
| I am still confusd. I read all the threads from this site. 2 senerios.
1. sel employed uses room exclusively for business activites but DOES NOT deduct the home office. are the first miles out the house business miles 2. S corp 100% stockholder company has no other office and uses the house of the stockholder but does not pay rent Are the first miles out the house business miles? Neil | |
Death&Taxes (talk|edits) said: | 28 February 2008 |
| "(3) If a taxpayer’s residence is the taxpayer’s principal place of business within the meaning of § 280A(c)(1)(A), the taxpayer may deduct daily transportation expenses incurred in going between the 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." Rev. Rul. 99-7 "Within the meaning" is interpreted as the home being the principal place of business, not whether it is deducted or not as a home office, or rented to the company.
Simplest example is a person who lives in another's house but conducts his business from there, a dependent, or a co-habitant. In my case, my 'home office' expenses as an employee would not exceed 2% of my AGI, and if they did there would be questions of exclusive use since the office is the passageway between many rooms and contains the front door to the house, but I can assure you that my home is my place of business | |
| 28 February 2008 | |
| but within the 280A we also see the word "exclusive use" which may nullify the rev rul 99-7 | |
Death&Taxes (talk|edits) said: | 28 February 2008 |
| If you would attend good seminars like those Kevin gives, or Gear Up or NCPE, you would find bright men and women interpret 99-7 the way I describe it. In fact, I have it in a seminar book given out by NCPE. Exclusive use has nothing to do with defining principal place of business in conjunction with auto use, but nothing I, or smarter people like Wayne Hebert, Jerry Riles, Dennis on this board, and Kevin on this board will change your mind, so to quote Wes, 'bye.' | |
| 28 February 2008 | |
| I was on NCPE website. which semiar do you suggest to cover the auto and home office expesnes
Neil | |
| 28 February 2008 | |
| (Before you answer, DT, I will announce that I am changing organizations to teach for this year, but can't announce everything yet) | |
| 28 February 2008 | |
| OK here is my final argument. Rev Rul 99-7 referes to § 280A(c)(1)(A), and (1)specifically states "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 gregular basis-(A) as the principal place ofbusiness for any trade or business of the taxpayer".
So the exlusive use is here again a priority to meet the rev rul 99-7 So I am assuming that if you do not meet the exclusive use the auto expense from residence to 1st stop would be non deductable Neil | |
RoyDaleOne (talk|edits) said: | 28 February 2008 |
| How is local transportation allocable to the dwelling unit?
Consider this quote: "The court applied the rationale of Commissioner v. Soliman, 506 U.S. 168 (1993), which states that where a taxpayer's business is conducted in part in the taxpayer's residence and in part at another location, two primary factors are considered in determining whether the home office qualifies under Code Section 280A as the taxpayer's principal place of business: (1) the relative importance of the functions or activities performed at each business location, and (2) the amount of time spent at each location." What are the fasts about (1) and (2) above. | |
RoyDaleOne (talk|edits) said: | 28 February 2008 |
| Please note that the law about home offices has changed since 1993 and may effect the court's reasoning. | |
| 28 February 2008 | |
| The following tutorial from the IRS gives good examples distinguishing between principle place of business and being able to deduct a home office. The first is necessary for the second, but is distinct from it: http://www.irs.gov/businesses/small/article/0,,id=155244,00.html | |
Death&Taxes (talk|edits) said: | 29 February 2008 |
| Rev. Rul. 99-7 is referring to the home office Code Section for only the usage of the term. The sentence goes 'principal place of business within the meaning of Sec. 280A(c)(1)(A)' AND THAT IS IT, no more or no less.....no b/s about exclusive use etc etc etc. The conclusion of the boys at NCPE is that "Principal place is all that is required under Rev. Rul. 99-7; there is no need to have a home office deduction."
And that is your problem; you want to see the home office deduction, to dot each 'i' and cross each 't' and as I pointed out above, said would be impossible if the legitimate principal place of business was not deducted for reasons beyond the taxpayer's power. You know, if I look hard enough I will find that I typed this explanation in another discussion within the past year, BUT FIND IT YOU DID NOT. Send the IRS out to Death & Taxes Inc. in Ocean Gate NJ to check if the company is reimbursing me correctly for my drives away from this principal place of business that I do not deduct.....then we will have more empirical proof. | |
| 29 February 2008 | |
| And here's an example of the interpretation D&T speaks of: http://doitrightfromhome.com/news/taxes_mileage.htm | |
| 29 February 2008 | |
| Ok I respect the boys from NCPE but aren't you folks missing the 1 part befor the A which states the dwelling unit which is "exclusively" used on a regular basis-
I believe the A is only valid if the 1 is valid which uses the work "exclusively" please comment | |
Death&Taxes (talk|edits) said: | 29 February 2008 |
| "No Mas" If Linda Stiff agreed with me, you would not believe her.
'Endeavor to persevere' | |
| 29 February 2008 | |
| In defense of Nshnider I recall reading about this exact situation in Quickfinder and also in a National tax publication course book. Both indicated that this area is not exactly crystal clear. But, as I recall, they seemed to lean toward it probably being OK. | |
| 29 February 2008 | |
| Ok, I'll bite. I agree that this isn't exactly crystal clear. But then again, what about tax preparation (beyond the basics) is? It would be great if the IRS would be explicit and not leave this up to what seems to amount to an art form at times, but they don't. So we're left to try to make sense of what they give us, and this is what I think: A business must have a principle place of business. There must be somewhere to claim as the business home office. If the house is the only place of business, that that must be the principle place of business, whether or not a particular piece of it is used exclusively. Now am I a CPA? No. A tax attorney? No. An IRS agent? No. Do I have any authority on this matter? No. But it just doesn't make sense to have a business without a principle place of business. Furthermore, there is an absence of the IRS saying "No, you can't do that", which seems to indicate that just maybe you can. | |
| 29 February 2008 | |
| Seems like a lot of tax stuff is maybe, but, it depends, facts and circumstances, however, except for, etc. Probably why there are a lot of tax court cases. Some of the more common situations don't seem to have clear cut solutions. The rules, regs, pubs, etc. always seem to dance around the edges but never quite get to what one would think would or should be a black or white situation. | |
Death&Taxes (talk|edits) said: | 1 March 2008 |
| Read Rev. Rul. 99-7 again: "The determination that a taxpayer’s residence is the taxpayer’s principal place of business within the meaning of § 280A(c)(1)(A) is not necessarily determinative of whether the residence is the taxpayer’s tax home for other purposes," What that says to me is 'just because it is your principal place of business does not mean it qualifies you in other areas, such as the 280A deduction, or traveling away from home, the example used in the ruling.
What it is also saying is the determination of principal place of business is outside the rules of 280A, but is determined in its own right. This seems obvious to me, but I guarantee you, this same question will be rephrased and asked again.
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| 1 March 2008 | |
| actually if you read Pub 463 page 15 states " if you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs betweeen your home and another work location (see pub 587) to see if your home office qualifies as a principal place of business.
When you go to pub 587 page 3 under principal place of business. "your home office qualifies as a principal place of business ifyou meet the following requirements 1. you use it exclusively and regularly...... there is the test according you the IRS Pub which i think holds more authority than the opinions of the seminar notebook from NCPE for the 2004 tax year . I would be interested to reading that workbook. Can you give me the reference and place to purchase it Neil | |
Death&Taxes (talk|edits) said: | 1 March 2008 |
| The writers of the ruling realized their might be confusion and added that sentence to clarify. Revenue Rulings trump publications.
And when reading the explanation that precedes the holding, further clarification is found: "In contrast, if an office in the taxpayer’s residence does not satisfy the principal place of business requirements of § 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. " They are discussing the level of activity that must be sufficient to overcome the inherently personal nature, as they call it, of the residence. The Publication is clarifying what you must do to deduct a home office. By your standard, my practice has no principal place of business, and that is ridiculous. By your reasoning, because I do not pay myself rent or take a home office deduction, my principal place of business must be my post office box a mile away. | |
| 1 March 2008 | |
| I am not taking the stand that you must deduct the home office or pay yourself rent, I am sugesting that the area used for the principal place of business must be used exclusively for the business. Whether you own or rent is irreveleant. The PO box a mile away would be your first stop as commuting cost then from that point to your 1st client would be deductable miles. Pub 587 page 3 does not suggest deductablity or rent it only states that your home office will qualify as a principal place of business if you eet the following requirements. "you use it exclusively and regulalary......" It does not reference pay rent or deduct. But it does specifically say you must use it exclusively. How do you get around that statement.
Thanks for this dialogue I think it is very educational and mind stimulating Neil | |
Death&Taxes (talk|edits) said: | 1 March 2008 |
| So I am satisfied that the strip of this room which is 10 feet by 6 feet which is taken up by my computer, a table, computer desk, bookcase and printer, plus two areas, both 6 x 4, on the other side of this room with copier, file cabinet and bookcase, are exclusively used for business. Thus we can concur that we can reach agreement, for even Quickfinder notes that there is no requirement that the business portion of a room be separated physically from the rest of the room by walls or partitions.
Yet I have an uncomfortable feeling that someday I might have to defend a person like myself whose office cannot be deducted because it is in the house of his wife, or companion. Let's save that for time out of busy season. | |
