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independent contractor business pertains only to the form of the
activity and not its substance. Having been engaged in the
paralegal business as an employee, see Primuth v. Commissioner,
54 T.C. 374, 377 (1970), petitioner did not change the general
nature of his business activities by working out of his home
office. Therefore, we conclude that petitioner, in 1992, was
carrying on a trade or business as a paralegal and is entitled to
deduct all of the other expenses at issue, with the exception of
the two following items.
The first item is the claimed expenses for $3,600 for a
portion of the rent associated with petitioner’s residential
premises. As applicable herein, section 280A provides that no
deduction shall be allowed with regard to the use of residential
property of the taxpayer. Some exceptions are provided in
section 280A(c). However, section 280A(c)(5) clearly provides
that no deduction shall be allowable in excess of the
income derived from such use. In other words, no deduction for
use of a residential unit can be taken if said deduction gives
rise to a loss. Accordingly, even though petitioner’s use of his
residence may have qualified as one of the exceptions under
section 280A(c)(1) through (4), section 280A(c)(5) disallows the
claimed rental expense deduction, as petitioner had no paralegal
income for 1992.
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