"Albert Wiersch" <donotreply[at]123donotreply123.com> wrote:

- quote -

I didn't think of this when I posted my first response but I
had a client do exactly this -- about 20 years ago, before
the current rules on first and second residences came up.

My client bought a two-bedroom townhouse for use as an
office. His daughter, who lived in her own house with her
own family, came to this unit as needed to do administrative
and secretarial work. He also allowed visiting executives
to stay in the unit when on trips to our city. He deducted
all the costs of this unit as business expenses.

To him, it was no different than if he had purchased a
condominium office somewhere in town.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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Albert Wiersch wrote:

- quote -

This may be a factual question for IRS. What % of the 2nd
home will you really use? We can't put a little bit of stuff
in each room and say it's 100% business. IRS may assume you
didn't buy the property just for the purpose stated unless
you were confident you won't lose money upon resale. If you
bought a commercial property, say 5,000 s.f. and used only
1,000 feet for your office, you might be gambling on a big,
future loss. In either case, but especially the former, IRS
may argue that the excess portion is investment property.
There's no deduction for depreciation or utilities on that
part, but you may be able to elect to capitalize interest
and taxes on the investment portion, reducing gain on later
sale. Requires research, as an unusual factual situation.

Fred F.

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"Albert Wiersch" <donotreply[at]123donotreply123.com> wrote:

- quote -

IANAL and I won't address the legal issues, as others have
done. However, if you do not live in the house, maintain
another house as your residence, then I don't think the home
office rules apply. As long as personal use not related to
the business is not material, all expenses of owning and
maintaining the property should be deductible. If you bought
an office building or condo, the home office rules would not
apply, why should they if the structure is a house, as long
as it is legitimately used as the place of business?

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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"Paul Thomas, CPA" <paulthomascpapc[at]bellsouth.net> wrote:
- quote -

Thanks Paul!

What if I used 90% of the house for business instead of
100%? Then could I deduct 90% of the expenses without
worring about using a little for "personal" use?

I am currently investigating the zoning and legal issues.

--
Albert Wiersch
Fix your website: http://onlinewebcheck.com

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"Albert Wiersch" <donotreply[at]123donotreply123.com> wrote:

- quote -

As an aside, and not really tax related, the first thing
that pops into my mind are other possible possible problems
resulting from exclusive business of the _entire_ house.

1) Will zoning laws in your area permit such exclusive
business use of residential property? You might think that
what they don't know won't hurt them and how could they ever
find out anyway. They can find out from neighbors who note
odd comings and goings at odd hours. No one ever sleeping
there, etc.

2) If you obtain insurance coverage for a residential
property and have a claim and the insurance company learns
that the property was for business use, they may deny the
claim. It will be obvious to the claims adjuster that the
home is not set up for family living.

3) If you finance the property as residental rather than
business property that might be considered obtaining
financing through fraud (in my opinion - I am not a lawyer).

4) If you do finance and insure as business property to
avoid those problems then #1 above will most certainly
apply.

I would suggest that you run your idea through a local
attorney familiar with the local zoning laws before
proceeding.

--
-Ernie-

"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."

Have you done your backup today?

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"Albert Wiersch" <donotreply[at]123donotreply123.com> wrote

- quote -

In general, you can take depreciation, mortgage interest,
property tax, utilities, etc and so on - that are actually
paid. If you use some of that space for personal use,
beware.

One thing to be mindfull of is if there are any restrictions
on that property, such that would prohibit you having a
business there. Some are set by the homeowners association,
others are set by county/city ordinance. Either way you
should check it out before you buy. And remember, where a
"home office" may be allowed, a home used as a full-time
business/office may not be allowed.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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I have a profitable business creating and selling a software
product. I currently use part of my home for the business
and take a home office deduction for the portion of my home
used for business.

I am thinking about buying another smaller home to use
exclusively for business and to work there instead of my
current home. I can work better away from the distractions
of home since my wife stays home, we have pets, and are
having a child soon. Plus, I will have a lot more room for
all the computer equipment, books, and other paperwork that
I have.

Since I will be using the 2nd home for only business, am I
correct to assume that it will cancel my current home office
deductions but I can deduct all the expenses and costs for
the 2nd home on my Schedule C as my principal place of
business? This would include all mortage interest,
utilities, repairs, maintenance, and HOA dues. I assume it
is like having, buying, or renting office space and that all
costs and expenses would be deductible.

Thank you.

--
Albert Wiersch
Fix your website: http://onlinewebcheck.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >