Charles E. King - Page 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                               
                  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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