Discussion:Business travel or commuting

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Discussion Forum Index --> Tax Questions --> Business travel or commuting


Dhtax (talk|edits) said:

24 November 2006
Now that we all have time on our hands :-) I'm looking for opinions on a couple of issues that my manager and I couldn't agree on last season. I won't tell you which of us held which opinion.

Facts: Client is a CFP, works out of an office in his home but does NOT declare/deduct home office expenses because the room is not "exclusive use". He has no other office. When he drives from his home/office to client sites, is that deductible business travel or commuting?

The next one is more complicated, so I'll post it separately.

Thanks DavidH

1040man (talk|edits) said:

24 November 2006
He has no other office. When he drives from his home/office to client sites, is that deductible business travel or commuting?

This is a deductible business travel expense. Because, I assume that he does not travel to the same client each day.

IntlTax (talk|edits) said:

24 November 2006
I agree that the travel to the clients is deductible, even though the home office is not exclusively used for business purposes. Rev. Rul. 99-7 does not require that the home office qualify for deductions under section 280A. Rather, Rev. Rul. 99-7 only requires that the "taxpayer's residence is the taxpayer's principal place of business within the meaning of Sec. 280A(c)(1)(A)." The residence can be the principal place of business without being exclusively used for business purposes. This is one minor error in the commuting flow chart at Commuting Flowchart.

Dhtax (talk|edits) said:

25 November 2006
Thanks. That was the position I took. I'm glad to get the reference.

Solomon (talk|edits) said:

31 December 2006
Regarding "taxpayer's residence is the taxpayer's principal place of business within the meaning of Sec. 280A(c)(1)(A)", the paragraph just above (A) is quite explicit by using the word "exclusively." Within the context of "exclusively" then (A) - namely, principal place of business would qualify. I read exclusivity into the principal place of business.

IntlTax (talk|edits) said:

31 December 2006
Solomon,

I took another look at this. Section 280A(a) provides the general rule that "no deduction . . . shall be allowed with respect to the use of a dwelling unit which is used by the taxpayer . . . as a residence." Section 280A(c)(1) provides that "Subsection (a) shall not apply to . . . a dwelling unit which is exclusively used on a regular basis (A) as the principal place of business for any trade or business . . . ."

Rev. Rul. 99-7 provides: "If a taxpayer's residence is the taxpayer's principal place of business within the meaning of §280A(c)(1)(A), the taxpayer may deduct daily transportation expenses incurred in going between the residence and another work location in the same trade or business . . . ."

The question is whether the IRS's safe harbor for commuting in Rev. Rul. 99-7, where it states "within the meaning of §280A(c)(1)(A)", includes the "exclusively used" language. I think it is a close call, but you may be correct in concluding that it does require exclusivity.

Thanks for your comments.

Solomon (talk|edits) said:

31 December 2006
IntlTax - That was merely my thought on the topic at hand. Although the original post was not explicit, I assumed this was not a retailer or wholesaler with stored inventory. If that were the case, then exclusivity would not apply per Sec. 280A(c)(2).

Death&Taxes (talk|edits) said:

1 January 2007
I woke up at 3am this New Years morning thinking of this discussion and a memory. My seminar notebook from NCPE for the 2004 tax year takes the opposite tack regarding 99-7 in their discussion of commuting issues. Their conclusion is that 'there is no relationship whatever between the commuting rules and whether or not taxpayer has a deductible home office.' They believe the ruling refers to the code section only for the usage of a term, and that there is no need to have a home office deduction. They go on to say that the ruling 'only requires one to pass the principal place of business test.' They note that the taxpayer might refuse to claim the home office, or not meet the 'regular and exclusive' test' but 'nonetheless the home becomes a work location for purposes of commuting.

Bringing this to a personal level, my office at my old home in upstate NY would not clear the 2% limitation since I am an employee, the only allocable items deductible on 2106 were electricity and insurance, and the 2100 sq feet house was on three acres of land, the value of which was 80-90% of the total cost of the house. This assumes the use of my basement portion by my pets to escape heat and thunder in summer did not rule out exclusive use. My current office is the entry for people to come into my house, rather than the nearby main entrance. Moreover to get to our family room, one must go through my tiny office of 110 square feet, jostling anyone working at the copier while passing through. In addition, it is the day time home of the dog.

I note the words 'within the meaning' are squishy. If 'exclusivity' were the rule, they might say that all qualifications must be met.

Solomon (talk|edits) said:

1 January 2007
To tell you the truth DT, I much prefer IntlTax and your NCPE seminar slant on 99-7, but for some reason "exclusivity" still gnaws at me a bit. At the same time, I am not aware that a home office is required to be claimed on a tax return (assuming it did qualify), but rather a taxpayer simply chose not to claim it. That seems to indicate some light to me at the end of the tunnel.

Solomon (talk|edits) said:

1 January 2007
"Disallowance of certain expenses..." is part of the heading of 280A. In the context of this description regarding "exclusivity", it seems to mean that to claim an expense for a home office on the basis of being a principal place of business then the usage must be regular and "exclusive", but really would have no bearing on defining a principal place of business. I now see why 99-7 cites 280A(c)(1)(A) only - rather than including the paragraph above (A) which includes "exclusively used".

Dennis (talk|edits) said:

1 January 2007
Doesn't have to be exclusive to meet the first stop of the day test, Solomon.

Solomon (talk|edits) said:

1 January 2007
Yeah - I see that now. At the same time, as DT noted, it hangs on the meaning of "principal place of business." Does this not then throw it back to the Supreme Court's decision in the Soliman case to determine what is the meaning of a "principal place of business?" Which is to say, the importance of the functions or else the time spent - not leaving out of course all facts and circumstances.

OR Taxman (talk|edits) said:

25 October 2007
Very interesting discussion. Glad it popped back up to the top or I might never have seen it.

I use a similar example quite often when discussing home office deduction and business travel mileage with clients. Has anyone out there been through an audit where the nature of miles - business travel v. commuting - was at issue based on the home office/principal place of business question at hand? Seems to me this is quite a common situation but perhaps it never comes up on exam.

Pmchavez (talk|edits) said:

3 February 2011
I read this discussion with interest for more of a business vs commuting mileage distinction. I get where mileage from a personal residence (deemed to be taxpayer's "tax" home) to taxpayer's client or customer is deductible bus mileage. But how about where the taxpayer is an employee and works at an office which is deemed to be taxpayer's "tax" home. Appears that daily round trip mileage from taxpayer's residence to the office and back home is nondeductible commuting expense. Makes sense. Let's say this taxpayer's round trip commute mileage is 40 miles a day. And let's say this same taxpayer first commutes to the office and then to a client 5 miles away from the office, then back to the office, and then back home at end of day, I think he/she drove 50 miles that day - 40 is commute and 10 is business. Now say the next day, same taxpayer drives directly to a different client 30 miles away from his/her residence. And then directly back home at the end of same day. Say this other client is located in the same metropolitan area (if that factors in). I think you take total mileage 60 and deduct normal daily commute mileage 40 for net 20 business miles that day. Anyone think all 60 should be business mileage? Thanks for your thoughts on this.

Death&Taxes (talk|edits) said:

4 February 2011
Read Publication 463

"Temporary work location. If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance."

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