5
The home office deduction is, therefore, limited to the excess of
the gross income generated from the business activity conducted
in the office, over all other deductible expenses attributable to
such activity, but which are not allocable to the use of the unit
itself. Grinalds v. Commissioner, T.C. Memo. 1993-66 (citing H.
Rept. 99-426, at 134-135 (1985), 1986-3 C.B. (Vol. 2) 1, 135).
In other words, the deduction may not create or increase a net
loss from the business activity to which it relates. Id.
In making the determination of the amount of gross income
derived from the use of petitioner's home office during 1990,
respondent took into account only the amount of gross income that
petitioner reported on his Schedule C. Because petitioner's sole
proprietorship incurred a net loss during the year at issue,
respondent disallowed the deductions for expenses attributable to
the home office in their entirety. Petitioner contends that his
interest income should be considered gross income for purposes of
section 280A(c)(5) because the interest income is used to finance
his business activities. Petitioner further contends that King
International is entitled to the same treatment afforded to a
corporation with respect to the deductibility of office expenses
and the classification of interest income. Petitioner presented
no evidence or authority to support his contentions.
Petitioner reported his interest on the Form 1040 of his
1990 return as personal interest income, not on his Schedule C as
business income. The fact that such income was used to finance
Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011