Shared home office

Technical topics regarding tax preparation.
#1
Nilodop  
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The law says
(c) Exceptions for certain business or rental use; limitation on deductions for such use
(1) Certain business use
Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis—
(A) as the principal place of business for any trade or business of the taxpayer,


How do I apply it to these facts? Unmarried couple AB rent a house and use it as their residence. A uses one room exclusively in his Sch C business B uses the same room exclusively in her Sch C business. No one uses that room for personal purposes.
 

#2
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The fact that there is no personal use of the office means that it is used exclusively for business. See Prop. Reg. 1.280A-2(g)(1). Both spouses' use in their respective businesses doesn't affect this. See Radnitz, T.C. Summary Opinion 2003-29.

https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/home-office-deduction-allowed-but-limited-by-income-produced/1pjdj
 

#3
Nilodop  
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Thank you. Helpful cites.

In the case, they were married, in my facts not. In the case, they claimed no deductions for the wife's use in her business. In my facts, they would. I think those differences would not change the answer for me. A and B would each claim deductions under 280A based on some reasonable allocation of time each spends in business use of the room. You agree?
 

#4
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Nilodop wrote:Thank you. Helpful cites.

based on some reasonable allocation of time each spends in business use of the room. You agree?


I think it depends:

1. Do they equally pay for rent, utilities...?

2. Do they each have separate space in the room such as individual work stations and or commonly used space?
 

#5
Nilodop  
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Yes they share rent and utilities, probably equally. Does the "equally" part matter?
As to the space, A is a videographer and therefore has tech equipment in an area that B does not use. B is in an animal care, training, and related business, and uses the room for that purpose. Otherwise, they share the space equally. As I said, A and B would each claim deductions under 280A based on some reasonable allocation of time each spends in business use of the room. I suppose it could be refined to allocate on use of power etc. as well.
 

#6
Big E  
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For many years I have had a married filing joint return tax client.
Both are individually self employed - with different business clients, recordkeeping, etc.
Both are in the same occupation.
They use 1 room of a 4 room coop 100% for business purposes set up with desk and computer space, file space, etc.
for each.
Since they each record their respective incomes separately, and their individual office expenses NOT SHARED separately,
what is shared is the allocated portion of utilities, mortgage interest and real estate taxes to the 1 room, and split those expenses equally. Have never had an issue.
 

#7
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Pub 587: Simplified method. Shared use. If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person.
You must allocate the shared space between you and the other person in a reasonable manner.
 

#8
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TAXMASTER wrote:Pub 587: Simplified method. Shared use.....
You must allocate the shared space between you and the other person in a reasonable manner.
 

#9
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TAXMASTER wrote:Pub 587: Simplified method. Shared use. If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person.
You must allocate the shared space between you and the other person in a reasonable manner.


For the past 2 years, since each of their respective gross income went down, I actually did take the square footage of that one room and split it 1/2 to each for the simplified method.
 

#10
Nilodop  
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Pub 587: Simplified method. Shared use. If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person.
(From the pub cited above).
That can't be the entire rule. In mu facts, they may use the same square feet, just not at the same time.
 

#11
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I believe that the rule stated in Pub. 587 comes from sec. 4.08(5) of Rev. Proc. 2013-13, and applies ONLY for purposes of determining whether the optional square footage method of calculating the home office deduction may be used:

(5) Taxpayers sharing a home (for example, roommates or spouses, regardless of filing status), if otherwise eligible, may each use the safe harbor method provided by this revenue procedure, but not for a qualified business use of the same portion of the home. For example, a husband and wife, if otherwise eligible and regardless of filing status, may each use the safe harbor method for a qualified business use of the same home for up to 300 square feet of different portions of the home.
 

#12
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How do I apply it to these facts? Unmarried couple AB rent a house and use it as their residence. A uses one room exclusively in his Sch C business B uses the same room exclusively in her Sch C business. No one uses that room for personal purposes.


See example below. This is for the simplified method.
Pub 587 Simplified method Shared use. If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person.
You must allocate the shared space between you and the other person in a reasonable manner.

Example. G and H are roommates. G uses 300 square feet of their home for a qualified business use. H uses 200 square feet of their home for a separate qualified business use. G and H both share 100 square feet for their respective qualified businesses in their mutual home.In addition to the portion that they do not share, G and H can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. If divided evenly, G could claim 250 square feet using the simplified method and H could claim 150 square feet.
 

#13
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TAXMASTER wrote:
How do I apply it to these facts? ... .In addition to the portion that they do not share, G and H can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. If divided evenly, G could claim 250 square feet using the simplified method and H could claim 150 square feet.


That was my line of thinking in post #4.
 


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