Taxpayers that use their homes to conduct business may qualify for a home office deduction. This deduction is available to taxpayers who work from an office located in their homes, as well as to those who use a part of their homes to provide day care services or to store inventory and products they sell. This course focuses on the statutory rules for taking a deduction for the business use of the taxpayer’s home. From this discussion, you should be able to determine which types of taxpayers are allowed to deduct expenses related to the business use of their homes. The requirements for each type of taxpayer that qualifies for the deduction are explored and explained.
Final Exam > Results Page
final exam score:
80%
Question 1
Correct
Bob Anderson uses one room in his home exclusively and regularly for all of his investment records and activities. He has substantial long-term holdings and derives most of his income from interest and dividends. Bob is retired and is not a broker or day trader. The following statement is true:
Bob can take a home office deduction because his investment activity is treated as a business.
Bob can take a home office deduction for his profit-making activity.
(You Answered) (Correct Answer) Bob may not take a home office deduction.
None of the above
Question 2
Incorrect
Leo Schwartz has a florist shop. Leo grows the plants for his shop in a greenhouse located on the lot next door to, but not attached to, his main home. The structure is not appurtenant to Leo’s home. The greenhouse is used exclusively and regularly in Leo’s business. Which of the following statements is true regarding Leo’s ability to deduct expenses related to the greenhouse?
(Correct Answer) Leo can deduct 100% of his expenses for the greenhouse as ordinary and necessary business expense.
(You Answered) Leo can deduct his expenses for his greenhouse, subject to the home office limitations.
Leo can deduct 50% of his expenses for the greenhouse.
Leo may not deduct any of the greenhouse expenses.
Question 3
Correct
Which of the following is not a requirement for deducting the costs associated with a storage space in the taxpayer’s home?
The taxpayer’s business is the selling of products at retail or wholesale to customers.
(You Answered) (Correct Answer) The space is used to store files used in the taxpayer’s business.
The storage space is a separately identifiable space in the home.
The storage space is for the storage of inventory or product samples.
Question 4
Correct
Albert Edy is a self-employed surgeon. Albert spends the majority of his time at two local hospitals performing his surgeries and conducting post-operative care. Both hospitals provide Albert with a place where he can conduct administrative or management activities. Albert uses one room in his home exclusively and regularly to perform a variety of tasks related to his medical practice, including contacting patients and hospitals regarding scheduling, maintaining billing records and patient logs, reading medical journals, and satisfying his Continuing Medical Education requirements. Which of the following is a true statement regarding Albert’s ability to deduct expenses related to his home office?
Albert does not qualify for the home office deduction because the most important aspect of his job is done in the operating room (at the hospital), and not at his home office.
Albert does not qualify for the home office deduction because he does not use the office regularly and exclusively for his business.
Albert does not qualify for the home office deduction because the hospitals at which he performs surgeries provide him with office space.
(You Answered) (Correct Answer) Albert qualifies for the home office deduction.
Question 5
Correct
Raymond James is a sole proprietor who regularly conducts most of his business, including meeting with clients, from the office located in his home. Raymond is also employed as an employee. Often, Raymond will take his employer’s work home and finished it in his home office in the evenings. Raymond estimates that he uses the home office 75% for business related to his sole proprietorship, and 25% of the time for his employer’s business. Which of the following statements is true regarding Raymond’s home office?
Raymond can deduct the expenses related to the home office because he uses the office exclusively and regularly for business.
Raymond can deduct 75% of the expenses related to the home office.
(You Answered) (Correct Answer) Raymond does not qualify for the home office deduction because the designated space is not used exclusively for business.
Raymond does not qualify for the home office deduction because the office is not his principal place of business.
