A.G. Kalman wrote:

- quote -

Except you would have to consider the temporary vs.
indefinite issue. The situation sounds "indefinite" to me.
But, even if not, "temporary" only lasts so long. <grin
MTW

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"A.G. Kalman" <glendale202-tax[at]yahoo.com> wrote:

- quote -

I was trying to figure out some way to have him be eligible
for the travel costs, but have come up with little. As long
as LA is his principal place of business, it's his tax home.
And he can only deduct his travel expenses to NM if there
is some business reason.

On the other hand the 9th Circuit has said that if a person
has more than one business, each business can have a
different tax home. So if he were to set up a separate
business and it's principal place is NM, he may have more
luck.

- quote -

A person's tax home for purposes of section 162 is, as the
courts say, his "abode" that is closest to his principal
place of business. Since he no longer has a permenant
residence in LA, NM may be his tax home for this purposes,
but be unable to deduct his commuting costs to LA because
there is no business reason for doing so other than
commuting.

This issue will probably require substantial research and
documentation.

Stu

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Stuart A. Bronstein wrote:
- quote -

I think we may have gotten side tracked from the principal
issue. It is not the ability to deduct a home office. The
issue is where is his tax home? There is no doubt that he
will be spending most (a very high percentage) of his time
in the Los Angeles Metropolitan area. It is there where the
bulk of his earnings will come from. After some more
research, it appears that LA would remain his tax home until
such time that he builds up enough of a practice in NM, to
make that his tax home. If LA is his tax home, then he can
not deduct the cost of any meals and lodging for himself
while in LA. He can still deduct the cost of meals for
clients and travel expenses when he travels away from LA.
Because he will also be operating his business in NM, it
seems to me that his round trip travel from LA to NM becomes
deductible as he is traveling away from his tax home. If he
stays at his residence in NM, he could deduct his fair share
of the living expenses (meals and lodging) of his residence
where he stays when he is "away from his tax home."

What am I missing here?

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Stuart A. Bronstein wrote:

- quote -

Actually, what I think the client is concerned about is his
travel expenses. In this case, eligibility for the home
office deduction is probably a "prerequisite" for
deductibility of the travel expenses (since travel from your
qualified home office to another business location is
presumably deductible). Without the qualified home office,
the travel would appear to be non-deductible "commuting."

MTW

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"MTW" <mtwingcpa[at]yahoo.com> wrote:

- quote -

I didn't realize that your home office had to qualify as a
deductible expense before you could use it as an office for
the purpose of the travel expense deduction.

Stu

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A.G. Kalman wrote:

- quote -

Only that I think you have properly identified the criteria
and parameters that apply. It sounds like the client would
clearly need to alter the structure (meaning locations,
method of operations, etc.) of this business in order to
assure the travel deduction. Maybe he can figure out a way
to do that; maybe not. I suppose it wouldn't be the end of
the world if he had to "eat" the travel expense.

MTW

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"A.G. Kalman" <glendale202-tax[at]yahoo.com> wrote:
- quote -

The code makes it clear that the office must be used for
client meetings (it does not say all client meetings) OR be
the principal place of business. I have not researched this
lately, but my recollection is that phone calls with clients
while in the home office will satisfy this requirement.

I suppose another approach would be to have him set up a C
corporation, and the home office restrictions won't apply.

Stu

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MTW wrote:
- quote -

out of her home. Two employees (one attorney and one admin
staff) work out of his LA office where he also holds meetings. My
concern is the employee who handles the billing and collection as
well as the one administrative staff. He already has an exclusive
office at his home that he uses regularly for administration and
management activities. However, it is my understanding that "the
principal place of business test" also requires that he not have
another place where substantial admin & mgt activities take
place. It seems to me that having that office in LA precludes
his current home from being his principal place of business.

Therefore, I am inclined to recommend that he eliminate the fixed
location of an office in LA if he can. I am also inclined to have
him hire a NM employee to handle the billing and collection
activity as that function is performed remotely already. That
still leaves one admin person who is handling all the scheduling,
filing, mail and other admin chores. It is not clear that this
function can be handled remotely. This person would need a place
to work (an office). I suppose the issue will come down to the
meaning of "substantial activity." Any thoughts?

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A.G. Kalman wrote:

- quote -

Would he still maintain an office in CA? If not, I would
presume that he could qualify his NM home as his "principal
place of business" and that should be all that's necessary.

Even if he continues to maintain an office in CA (for use by
his other CA employees), he might still be able to qualify
his NM home under the "administrative or management" use
rule.

However, if for some reason he can't qualify the NM home
under 280A, then I think he's got a problem. <grin
MTW

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Advice requested for the following situation:
Attorney with a professional CA corporation operates out of
LA where he lives. He is an employee of the corporation and
there are three other employees. Main office is located in
LA. Source of revenue is CA based. Attorney has vacation
property in NM and wants to semi-retire in NM with his
family. They are selling their home in LA and relocating to
NM. Attorney will be flying to CA to transact business. He
will probably either stay at a hotel, LA Athletic Club or
possible rent an apartment. He intends to move his office
to his NM residence. Any space required for meetings in CA
with clients will be daily rentals.

As an employee of the corporation it certainly appears as
though he would become nothing more than a commuter from NM
to CA. As such, his travel expenses would not be deductible
and any reimbursement from the corporation would be taxable
income. We are all wondering if this can be changed by
becoming a sole proprietor with an exclusive office at his
NM residence. His income would still be CA sourced. He
would still have at least one or two CA employees. He
intends to start to gain some NM business but that would be
small compared to the CA revenue.

What does it take to make NM his tax home in order that the
costs to travel and stay over in CA become deductible?

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