Limitations on Business Expenses
i.    Code: 280A(a) – (c)(1)
ii.    280A does not grant any deductions but is more disqualifications of 162.  If and only if you’ve satisfied 162 can you attempt to run the 280A obstacle course.  280A doesn’t give you anything; it’s just a disallowance rule.
1.    4 exceptions however permit deductions incurred for certain:
a.    home offices,
b.    inventory storage
c.    rental, &
d.    day care
iii.    280A does not limit those deductions that are allowable w/out reference to 162 such as interest expenses (163) or taxes (164)
iv.    To qualify for home office deductions, the taxpayer must fit into one of three categories (280A(c)(1)):
1.    Principal place of business.  E.g., if I work for Fulbright, I’m already hosed in this regard b/c that big ass building on Ross Ave. is my principal place of business, not the study where I do some of Fulbright’s work.
2.    Place for meeting with clients in the regular course of business.  If you work for Fulbright, meeting clients at your house will not be the “regular course of business,” so you’ll be hosed here.
3.    Separate structure.  E.g., guest quarters turned into an office.
a.    Note: even if you can cram yourself into one of these three categories, if you’re an employee, the home office must be for the convenience of the employer.  See flush language of 280A(c).  Is Fulbright likely to testify to the Tax Court that my home office is for their convenience?  Not hardly.
v.    Soliman.  Disallowed a home office deduction for a doctor who practiced at several hospitals but was not provided office space at any of the hospitals.  Although he used a room in his home exclusively to perform administrative and management activities related to his medical practice, the Sct. upheld the IRS’s position that the “principal place of business” for the taxpayer was not the home office b/c the taxpayer performed the “essence of professional service” at the hospitals.
1.    Congress changed the statutes to be more taxpayer friendly. 280A is amended to specifically provide that a home office qualifies as the “principle place of business” if:
a.    the office is used by the taxpayer to conduct administrative or management activities of a trade or business, and
b.    there is no other fixed location of the trade or business where the taxpayer conducts substantial administrative or management activities of the trade or business.
i.    But note: the deduction will be allowed for a home office meeting this two-part test only if the office is exclusively used on a regular basis as a place of business by the taxpayer and, in the case of an employee, only if such exclusive use is for the convenience of the employer.
ii.    The fact that a taxpayer also carries out administrative or management activities at sites that are not fixed locations of business such as a car or hotel room will not affect the taxpayer’s ability to claim a home office deduction.
iii.    If a taxpayer cannot meet the two requirements then they may be able to still claim a deduction under the principle place of business.