Office in home deduction

[Linda Mathey]

I have a client who retired as an engineer. He designed a specific product line. He has been contacted by other companies with similiar products. He is working out of his home assisting them in areas that do no violate his confidentiality agreement. He wants to take office in home expenses but not depreciate his home. His rationale is that he only has about a two year window until his skill set will be obsolete. When the consulting is over in two years he intends to sell the home and move. He does not want to have to worry about the fact he depreciated a portion of the home.

Would the IRS care that he did not take depreciation? Would this be a case where they would take the position that it was depreciation "allowed or allowable?" and impute depreciation anyway?

[grandmabee]

I have a client who retired as an engineer. He designed a specific product line. He has been contacted by other companies with similiar products. He is working out of his home assisting them in areas that do no violate his confidentiality agreement. He wants to take office in home expenses but not depreciate his home. His rationale is that he only has about a two year window until his skill set will be obsolete. When the consulting is over in two years he intends to sell the home and move. He does not want to have to worry about the fact he depreciated a portion of the home.

Would the IRS care that he did not take depreciation? Would this be a case where they would take the position that it was depreciation "allowed or allowable?" and impute depreciation anyway?

what other OIH expense does he want to take? if it is expenses relating to the home and % based on office then yes it is allowed or allowable. but if is he only taking the BUSINESS phone and office supplies etc then no

[Linda]

what other OIH expense does he want to take? if it is expenses relating to the home and % based on office then yes it is allowed or allowable. but if is he only taking the BUSINESS phone and office supplies etc then no

Also, if office is not separate from home, but in home, than there will be no allocation of sales price, just depreciation allowed/allowable if office is used for two years prior to sale.

[jainen]

>>He does not want to have to worry about the fact he depreciated a portion of the home.<<

I guess I shouldn't be too skeptical of this attitude. A lot of people consider depreciation to be some kind of voodoo. It's one of the main reasons educated people with fairly simple returns will pay me hundreds of dollars to put numbers they themselves give me onto standard forms the IRS gives everyone.

But isn't this engineer sort of asking if it's okay to pay higher taxes now to avoid lower taxes at some indefinite future time? I mean, is he desperate for Social Security quarters to bump up his retirement?

[Linda Mathey]

He wants to take the mortgage interest, real estate taxes, utilities, insurance, etc. on the home office which is 5.5% of the total sq ft. I will advise that if we do that he needs to take the depreciation as well. Otherwise he should forget it and not take OIH.

Thanks for the responses.