Mr. Pencil

Thanks for the kindness. No words bother me (except profanity). I thought the discussion was about mileage, not O.I.H. Now I'm not even sure what the question was, but anyway it seems to have been pre-answered by reasonable research.

It's not an "exception." It is just one way to qualify for business-use-of-home deductions. It does not meet the definition of a "principal place of business," which is another way to qualify. See Pub 587. Transportation between a business location and a home office that is not used exclusively and regularly as a principal place of business is non-deductible commute. See Pub 463. Seriously, look this stuff up!

No, I am in the category of preparers who prefers to follow instructions. I would not report the income, because it is not reportable. I would probably disclose the nonconforming treatment of Form 1099 to protect the client from accuracy penalty, in case he forgot some other days he also rented.

My point exactly. If the reason is that the home office does not meet any of the fairly generous but still technical definitions of principal place of business, then the deduction can not be justified. Principal place of business does not simply mean the place where most of the most important work is done. For a home office, it specifically means a place used exclusively and regularly for business. I can't say if that rule is good or fair, but I can say that it IS the rule. Transportation between a business location and a home office that is not used exclusively and regularly as a principal place of business is non-deductible commute.

The 1099 is appropriate. The issuer does not know whether the rental is taxable to the recipient or not. For those who prefer to file the way the IRS expects, according to instructions, this income would not be reported. However, that would certainly generate a distressing letter, so Line 21 with an explanatory offset is a common and effective procedure. Another approach that actually follows instructions is to attach Form 8275 or other disclosure. Schedule E makes no sense, because there are no allowable deductions.

That is correct, according to tax law. >> If I sit , at my work desk, and use it to look up my home banking to make sure I did schedule that electric bill -- boom; I've just lost my "exclusive" use and the home office deduction.<< That is also correct, according to tax law. >>But this IS my business's sole office, and when I go to a client's site, that is solely business miles -- I'm going to their location for the purpose of doing work that cannot be done from/at my location for whatever reason.<< That is not relevant, according to tax law. But I am amused by the justification for taking the deduction, "for whatever reason"!

I'm happy to see you refer to a specific rule. I would be even happier if you could identify that rule from Congress. The only thing I know of is that a court decided a home office could be a principal place of business for doing administrative work, a change from the earlier definition of most important work. But that did not change the requirement of exclusive and regular use. Certainly IRS pubs are not genuine authority. I myself pointed that out in an earlier thread. But that only works when there is something better, like a code section or regulation.

She may have an office at home, but (according to Pub 587) a home office can not be a principal place of business unless it it is used "exclusively and regularly." And (according to Pub 463) if the home is not a principal place of business, transportation between home and another work location is non-deductible commute.

Report on Form 4797. Since the property was held for sale rather than investment, it was not a capital asset. Please cite a source for that opinion.

I would simply thank her for considering my services, and invite her to consult again if she has a need. And explain that I am returning her papers by mail, without charge. No other comment has any business purpose.

Thanks for a very good review, JohnH. I appreciate the way it covers records, because substantiation of volunteer expenses is comparable to what's required for cash. In particular note that travel must be as an official adult leader, which means the adult must be registered and trained. If the client does not claim dues and uniform costs, I will not allow travel costs. An interesting thing is that the IRS itself uses scouting uniforms as an example of deductible expenses. But the scout unit as such (at least for Boy Scouts) is not a 501(c )(3) organization, and in fact it is "owned" by the sponsoring church or other community organization rather than national BSA. I accept substantiation from the church or the local Scout council, but not from the Scoutmaster. For donations of something valuable like land or boats, I recommend the donor give it to the sponsor, or sell the asset and donate cash directly to the local unit or council if that's who they want to benefit. If they want the troop to use the land or boat instead of having it sold off, it must go to the church or to a separately formed corporation to protect the asset from the national people. That's just reality.

I agree it goes on Line 21. It reminds me of inherited book royalties. These would have been SE income for the author, but the heir is not conducting a trade or business. Therefore "passive income" is not the right description, because that refers to a business activity. For example, it could not be used to offset passive losses from a rental activity.

You rather have to go there for EIC. See the instructions for Form 8867. Or just see Form 8867. He can't get EIC if he was a non-resident alien at any time during the year, even if later he gets his papers.

It doesn't matter what it used to be in the now-cold hands of the decedent--clearly the estate only held it for sale. But like everything else in the mother's taxable estate, it got a new basis at fair market value. Which is presumably the same as sales price three weeks later. So although it's a reportable transaction there's no gain In fact there are probably deductible expenses. I suppose those are for estate administration, but I don't really know. Schedule F doesn't seem right because it wasn't for profit. Another way it might sort of look like gain is when they sell the land, basis will only be FMV at death excluding the timber value.

Oh sure--a long-term rental makes the best dream home for retirement! Well, I suppose you won't have to worry about it anyway. Again, pardon my cynicism, but when the time comes they will probably "want a local tax preparer." That is, one who doesn't know they rented the house for 10/12 of the time.