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As previously noted, section 162 allows taxpayers a
deduction for all ordinary and necessary expenses paid or
incurred in carrying on a trade or business. Under section 280A,
however, deductions associated with a home office are generally
disallowed unless the home office was used exclusively and
regularly as the principal place of business of 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 considered 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. See 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 is regarded as the principal
place of a taxpayer’s business. See 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:
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Last modified: May 25, 2011