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Locate your tax home

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in Small Business Tax

Where’s your “home” for income tax purposes? According to the prevailing tax rules and regulations, it’s the general area of your main workplace.

For example, you might work at several business locations and not have a regular place of business. As a result, the location of your tax home is based on several factors, including the time spent, the work performed and the income earned at each location. If you’re self-employed, your tax home can be the place where you live, but the IRS may contest this assertion.

New case: The taxpayer, a resident of Las Vegas, was a video producer for the American Israel Public Affairs Committee (AIPAC). He also owned several rental properties in the Las Vegas area.

The taxpayer’s responsibilities for AIPAC included writing scripts and reviewing footage. He did most of this work at an office in his Las Vegas home.

Prior to 2007, the taxpayer produced videos for AIPAC at studio facilities in Las Vegas. But then AIPAC constructed a building in Washington, D.C., for production activities. Subsequently, the taxpayer had to travel to D.C. to use the editing facilities and other resources at the building. He continued to write scripts and perform other services at his Las Vegas home.

The average length of the taxpayer’s stays in D.C. was two weeks. Initially he stayed at hotels, but from 2007 through 2013 he rented a condo to save money. AIPAC reimbursed him for certain meals and other expenses when he was in D.C.

The taxpayer claimed substantial deductions for travel expenses over several years, including one tax year in which the deduction exceeded $55,000. The IRS challenged the deductions because it said the taxpayer’s official tax home was in Washington, but the Tax Court disagreed.

The taxpayer continued to perform substantial services for AIPAC in Las Vegas. He only traveled to D.C. to complete the production process and stayed there just a few weeks at a time. Accordingly, the Tax Court ruled that Las Vegas was the taxpayer’s “tax home,” not the place where he did the editing work. (Barrett, TC Memo 2017-195, 10/2/17)

Tip: Deductions were denied in this case due to improper substantiation.

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