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In the above calculations, petitioners treat the Inn as what
they refer to as a “commercial structure,” and petitioners do not
apply the exclusive-use limitation of section 280A(f)(1)(B) to
the dual-use portion of the Inn.
On audit, because petitioners used a portion of the Inn as
their personal residence, respondent applied the exclusive-use
limitation of section 280A(f)(1)(B) and disallowed all business
deductions relating to the dual-use portion of the Inn.
Respondent recalculated allowable depreciation and interest
deductions relating to the bed and breakfast business based on an
allocation factor of 77 percent (i.e., the portion of the Inn
used exclusively in the business).
Discussion
Section 280A(a) provides a general disallowance rule for
expenses relating to a “dwelling unit” that is used as a personal
residence of the owner taxpayer. Section 280A(a) provides
generally as follows:1
Except as otherwise provided in this section * * * no
deduction * * * shall be allowed with respect to the
use of a dwelling unit which is used by the taxpayer
during the taxable year as a residence.
For purposes of section 280A, a dwelling unit is treated as
used as a taxpayer’s residence if the taxpayer uses the dwelling
1 Certain exceptions to the general disallowance rule of
sec. 280A(a) are not applicable to the issue before us.
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Last modified: May 25, 2011