Publication 587 - Business Use Of Your Home - 2002 (Page 4 of 27) in pdf

is not a trade or business, you cannot take a deduction for

Administrative or management activities performed at

its business use.

other locations. The following activities performed by

you or others will not disqualify your home office from

Example. You use part of your home exclusively and

being your principal place of business.

regularly to read financial periodicals and reports, clip bond

•

You have others conduct your administrative or

coupons, and carry out similar activities related to your

management activities at locations other than your

own investments. You do not make investments as a

home. (For example, another company does your

broker or dealer. So, your activities are not part of a trade

billing from its place of business.)

or business and you cannot take a deduction for the busi-

•

You conduct administrative or management activities

ness use of your home.

at places that are not fixed locations of your busi-

ness, such as in a car or a hotel room.

Principal Place of Business

•

You occasionally conduct minimal administrative or

You can have more than one business location, including

management activities at a fixed location outside

your home, for a single trade or business. To qualify to

your home.

deduct the expenses for the business use of your home

•

You conduct substantial nonadministrative or non-

under the principal place of business test, your home must

management business activities at a fixed location

be your principal place of business for that trade or busi-

outside your home. (For example, you meet with or

ness. To determine your principal place of business, you

provide services to customers, clients, or patients at

must consider all the facts and circumstances.

a fixed location of the business outside your home.)

Your home office will qualify as your principal place of

•

You have suitable space to conduct administrative or

business for deducting expenses for its use if you meet the

management activities outside your home, but

following requirements.

choose to use your home office for those activities

instead.

1) You use it exclusively and regularly for administrative

or management activities of your trade or business.

Example 1. John is a self-employed plumber. Most of

2) You have no other fixed location where you conduct

John’s time is spent at customers’ homes and offices

substantial administrative or management activities

installing and repairing plumbing. He has a small office in

of your trade or business.

his home that he uses exclusively and regularly for the

Alternatively, if you use your home exclusively and

administrative or management activities of his business,

regularly for your business, but your home office does not

such as phoning customers, ordering supplies, and keep-

qualify as your principal place of business based on the

ing his books.

previous rules, you determine your principal place of busi-

John does not do his own billing. He uses a local

bookkeeping service to bill his customers.

ness based on the following factors.

John’s home office qualifies as his principal place of

•

The relative importance of the activities performed at

business for deducting expenses for its use. He uses the

each location.

home office for the administrative or managerial activities

•

of his plumbing business and he has no other fixed location

If the relative importance factor does not determine

where he conducts these administrative or managerial

your principal place of business, you also can con-

activities. His choice to have his billing done by another

sider the time spent at each location.

company does not disqualify his home office from being his

principal place of business. He meets all the qualifications,

If, after considering your business locations, your home

including principal place of business, so he can deduct

cannot be identified as your principal place of business,

expenses (to the extent of the deduction limit, explained

you cannot deduct home office expenses. However, see

later) for the business use of his home.

the later discussions under Place To Meet Patients, Cli-

ents, or Customers or Separate Structure for other ways to

Example 2. Pamela is a self-employed sales representa-

qualify to deduct home office expenses.

tive for several different product lines. She has an office in

her home that she uses exclusively and regularly to set up

appointments and write up orders and other reports for the

Administrative or management activities. There are

companies whose products she sells. She occasionally

many activities that are administrative or managerial in

writes up orders and sets up appointments from her hotel

nature. The following are a few examples.

room when she is away on business overnight.

•

Billing customers, clients, or patients.

Pamela’s business is selling products to customers at

various locations throughout her territory. To make these

•

Keeping books and records.

sales, she regularly visits customers to explain the avail-

•

Ordering supplies.

able products and take orders.

Pamela’s home office qualifies as her principal place of

•

Setting up appointments.

business for deducting expenses for its use. She conducts

•

Forwarding orders or writing reports.

administrative or management activities there and she has

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Publication 587 - Business Use Of Your Home - 2002 Page 4

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