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associated with a home office are generally disallowed unless the
home office was used exclusively and regularly as the principal
place of business for the taxpayer.
Where a taxpayer’s business is conducted in part in the
taxpayer’s residence and in part at another location, the
following two primary factors are analyzed in determining whether
the home office qualifies under section 280A(c)(1)(A) 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. Commissioner v. Soliman, 506 U.S. 168, 175-177 (1993).
Whether the functions or activities performed at the home
office are necessary to the business is relevant but not
controlling, and the location at which goods and services are
delivered to customers generally will be regarded as the
principal place of a taxpayer’s business. Id. at 176. The
relative importance of business activities engaged in at the home
office may be substantially outweighed by business activities
engaged in at another location. The Supreme Court has explained
as follows:
If the nature of the business requires that its
services are rendered or its goods are delivered at a
facility with unique or special characteristics, this
is a further and weighty consideration in finding that
it is the delivery point or facility, not the
taxpayer's residence, where the most important
functions of the business are undertaken. Id. at 176.
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Last modified: May 25, 2011