In Uncategorized on 08/20/2013 at 17:08

A reminder to preparers from that obliging jurist Judge Gustafson: a house on wheels is still a house, and may suffice as a qualified personal residence for Section 280A (if you can show exclusive business use) and Section 163 purposes. The case is Keith Dunford and Ena Dunford, 2013 T. C. Memo. 189, filed 8/20/13.

Keith and Ena traveled a lot, and claimed it was for business, but their recordkeeping didn’t substantiate their claims. And they already had a house, rooted firmly to the soil of Quincy, Illinois.

I’ll spare you Judge Gustafson’s bean-count through the claimed deductions and NOL. Even though IRS unaccountably allowed Keith and Ena to deduct expenses for which they were reimbursed, nothing is new here.

Section 163 allows qualified principal residence mortgage interest deduction for principal residence plus one other elected by taxpayer, but neither the statute nor the regulations prescribe when and how to elect, and the caselaw permits election even during litigation.

So Keith and Ena’s Beaver Contessa (great name!) motor home, encumbered by a Bank of America mortgage on which Keith and Ena paid interest, qualifies for the deduction.

Keith’s claim that he used a countertop in the Beaver Contessa for his business operations doesn’t get it: “The Dunfords did not prove that there was an identifiable portion of their motor home that was used exclusively for business purposes. The area they seemed to put forward as the home office was the countertop that Mr. Dunford used as a desk; but (1) they did not make any showing of the percentage of the vehicle that constituted this area (it would be a very small percentage), and (2) it is implausible to suggest that, in the cramped quarters of a motor home, an unclosed area like the countertop would somehow be exclusively reserved to business activity. Accordingly, all deductions (other than deductions for interest expenses) the Dunfords claimed ‘with respect to the use of’ their motor home are disallowed under section 280A(a).” 2013 T. C. Memo. 189, at p. 17

IRS also claimed that, inasmuch as Keith and Ena lived in the motor home, their claimed Section 162 travel expenses weren’t for travel, because they were never away from their tax home. See my blogpost “Home Is Where the Heart Is’, 7/21/12. But IRS had allowed some expenses during examination, and didn’t change position in the litigation, so Judge Gustafson blows off that argument in a footnote.

“The Commissioner’s principal contention as to travel expenses is that the Dunfords have not substantiated them, beyond what the Commissioner has conceded. In response to a question raised by the Court, the Commissioner contended after trial that, for tax purposes, the Dunfords had no ‘home’ … (other than the motor home, from which they were not ‘away’ while traveling), so that ‘Petitioners are not entitled to deduct expenses arising from their travels… in amounts greater than already allowed by respondent.’ (Emphasis added.) Logically, the Commissioner should ‘allow’ zero away-from-home travel expense amounts if petitioners had no ‘tax home’; but he does not retract his prior concession. Since we uphold the Commissioner’s primary contention (lack of substantiation), and since the Commissioner continues to concede the deductibility of the amounts that were substantiated, none of the amounts in dispute turn on the ‘tax home’ issue, so we do not address it.” 2013 T. C. Memo. 189, at pp. 24-25, footnote 11.

But taxpayers using motor homes in their trade or business should beware: this issue will arise again.


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