Michael H. Visin and Natalie Marselly - Page 9

                                        - 9 -                                         
                    dealing with the taxpayer in the normal course of                 
                    his trade or business * * * .                                     
               The liberalizing effect of section 280A(c) is not without              
          its limitations, however.  In particular, and as relevant herein,           
          section 280A(c)(5) limits a taxpayer's deductions for the                   
          business use of an apartment to the amount by which the gross               
          income generated from the business activity conducted in the                
          apartment exceeds the deductions for expenses attributable to               
          such activity that are not allocable to the business use of the             
          apartment itself.  See Martin v. Commissioner, T.C. Memo. 1996-             
          503, affd. per curiam without published opinion 155 F.3d 559 (4th           
          Cir. 1998).  In other words, no deduction for use of an apartment           
          may be claimed if said deduction would give rise to, or increase,           
          a net loss from the business to which the deduction relates.  Id.           
               The foregoing exegesis of section 280A(c)(5) is confirmed by           
          the legislative history of the most recent relevant amendment to            
          that section.  Thus:                                                        
                                 Reasons for Change                                   
               Limitations on deduction                                               
                              *   *   *   *   *   *   *                               
               The committee believes that a home office deduction to                 
               which section 280A applies should not be used to reduce                
               taxable income from the activity to less than zero.  In                
               adopting the provisions of the bill, the committee                     
               reemphasizes that section 280A was enacted because of                  
               concerns about allowing deductions for items which have                
               a substantial personal component relating to the home,                 
               which most taxpayers cannot deduct, and which                          
               frequently do not reflect the incurring of                             

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011