6
business operations does not transform personal interest income
into business income derived from petitioner's use of the office
in his home. Moreover, King International is a sole
proprietorship with an office in petitioner's home, not a
corporation with an office outside of petitioner's residence,
and, consequently, the deduction of expenses attributable to the
home office is subject to the limitations prescribed in section
280A(c)(5).
King International earned gross income of $950 and incurred
a net loss of $10,332.26 for 1990. A deduction for expenses
attributable to a home office may not create or increase a net
loss from the business activity to which it relates. Grinalds v.
Commissioner, supra. Accordingly, petitioner is not entitled to
deductions related to his home office. Respondent is sustained
on this issue.
We next consider whether petitioner is entitled to deduct
health insurance expenses of $950. Section 162(l)(1) permits
self-employed individuals to deduct 25 percent of the amount paid
during the year for insurance which constitutes medical care for
themselves, their spouses, and their dependents. Section
162(l)(2)(A) limits this deduction to the "earned income (within
the meaning of section 401(c)) derived from the trade or business
with respect to which the plan providing the medical care
coverage is established."
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