T.C. Memo. 1999-148
UNITED STATES TAX COURT
JOHN A. AND MARGARET R. GOSLING, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 22586-97. Filed May 3, 1999.
John A. Gosling, pro se.
Ross M. Greenberg, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7443A(b)(3) and Rules 180, 181, and
182.1
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable years in
(continued...)
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Respondent determined deficiencies in petitioners' Federal
income taxes for the taxable years 1993 and 1994 in the amounts
of $3,942 and $2,725, respectively.
After concessions by petitioners,2 the issue for decision is
whether petitioners are entitled to certain deductions. Our
disposition of this issue will depend upon whether petitioner
husband's home office constitutes his principal place of
business. We hold that petitioner husband's home office was his
principal place of business and that petitioners are therefore
entitled to the deductions at issue herein.
FINDINGS OF FACT
Some of the facts have been stipulated, and are so found.
Petitioners resided in Savannah, Georgia, at the time that their
petition was filed with the Court.
1
(...continued)
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
2
Petitioners concede that they are not entitled to
deductions for the following expenses:
Expense claimed 1993 1994
Advertising $100 $108
Office 485 --
Travel 6,475 6,960
Other expenses 271 335
Insurance 1,897 705
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During the years in issue, petitioner husband (petitioner)
was primarily employed as the music director of the Hilton Head
Orchestra, a community orchestra, and the Hilton Head Choral
Society (collectively, Hilton Head). As a music director,
petitioner rendered services in a number of capacities: as a
conductor, as an organizer or producer, and as an impresario.
During that same year, petitioner was also employed as the choir
conductor for the First Presbyterian Church, and as an adjunct
professor of music at the University of South Carolina, Hilton
Head branch. For a brief period during 1993, petitioner was
employed as the principal guest conductor of the Savannah
Orchestra. None of the various entities that employed petitioner
provided him with an office.
Petitioners reside in a four bedroom single-family home.
Throughout the years in issue, the fourth bedroom of petitioners'
house was used exclusively by petitioner as a home office. The
room was set up as a typical office, containing a desk, shelving,
a computer, filing cabinets, and other office equipment used by
petitioner to perform business-related duties.
Petitioner spent the majority of his working hours at his
home office. Part of that time he performed duties related to
his position as a conductor. An important aspect of petitioner's
job as a conductor was to select the repertoire for each concert.
Selecting the repertoire was a time consuming process, and
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petitioner spent much time at his home office performing that
duty. Petitioner also spent time preparing for concerts by
studying scores, researching the composer and musical epoch, and
evaluating the caliber of individual participating musicians.
Petitioner also used his home office to perform duties that
related to his position as an organizer for Hilton Head. In that
capacity, he was both a manager as well as an administrator.
Petitioner used his home office to negotiate contracts for future
engagements, prepare schedules for upcoming events, reserve
facilities, and obtain licensing rights. Petitioner also spent a
substantial amount of time on the phone coordinating the hiring
of musicians and the procurement of instruments. Further, he
used his home office to prepare promotional literature for
upcoming concerts and to write short story books which he
utilized in conjunction with children's concerts. Also at the
home office, petitioner met with new musicians, counseled
performers, and held minor rehearsals.
Further, an important aspect of petitioner's role as a music
director was to act as the impresario, responsible for attracting
talented and well known soloists to perform at Hilton Head.
Petitioner used his home office to establish and maintain contact
with such performers. Almost all of petitioner's efforts in this
regard were carried out from his home office.
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A smaller portion of petitioner's time was spent at the
Hilton Head concert hall rehearsing performances and conducting
concerts. Petitioner traveled about 120 miles (round trip) to
perform these duties at the Hilton Head concert hall.
On petitioners' returns for 1993 and 1994, petitioners
claimed home office expense deductions in the amounts of $1,094
and $1,106, respectively.3 Petitioners also claimed car and
truck expense deductions in the amounts of $6,720 for 1993 and
$6,000 for 1994.4
OPINION
Section 162(a) allows a deduction for the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on a trade or business.
Section 280A(a) provides that in the case of a taxpayer who
is an individual, no deduction otherwise allowable under chapter
1 of the Internal Revenue Code (relating to normal taxes and
surtaxes) shall be allowed with respect to the use of a dwelling
unit which is used by the taxpayer during the taxable year as a
residence. Section 280A(c) provides for exceptions to the
general rule of section 280A(a). As pertinent herein, section
3
Respondent concedes that there is no issue as to
substantiation and does not contend that the ratio of expenses
allocated to the home office exceeds the proper allocation.
4
Similarly, respondent concedes that these expenses have
been substantiated.
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280A(a) shall not apply to any item to the extent that such item
is allocable to a portion of the dwelling unit which is
exclusively used on a regular basis as the principal place of
business for any trade or business of the taxpayer. See sec.
280A(c)(1)(A). Petitioners are therefore entitled to the home
office deduction only if the home office was exclusively used on
a regular basis as the principal place of petitioner's business.
Similarly, petitioners' entitlement to the car and truck
expense is also dependent upon petitioner's home office's meeting
the requirements of section 280A(c)(1)(A). The commuting expense
from a taxpayer's home to his regular place of business is
generally a nondeductible expense. See sec. 1.162-2(e), Income
Tax Regs. By contrast, expense of travel between a taxpayer's
home office and another place of business is not commuting
expense and is deductible under section 162(a), if the home
office is the taxpayer's principal place of business within the
meaning of section 280A(c)(1)(A). See Curphey v. Commissioner,
73 T.C. 766, 777-778 (1980).
We have found that petitioner's home office was used
exclusively and regularly in petitioner's business. We now
consider whether petitioner's home office was his principal place
of business.
In Commissioner v. Soliman, 506 U.S. 168 (1993), the Supreme
Court identified two primary factors to be considered in deciding
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whether a home office is the taxpayer's principal place of
business: (1) The relative importance of the activities performed
at each business location, and (2) the time spent at each place.
See id. at 175. The relative importance of the activities
performed at each business location is to be determined by the
basic characteristics of the taxpayer's particular business. The
point where goods and services are delivered must be given great
weight in determining the place where the most important
functions are performed. See id.
We think that the importance of the activities performed at
petitioner's home office and the amount of time spent on such
activities support the conclusion that petitioner's home office
was his principal place of business. In so concluding, we rely
heavily on the fact that petitioner was not only a conductor but
rendered services in a number of other capacities. In those
other capacities, petitioner's most important functions were
performed at his home office. Cf. Genck v. Commissioner, T.C.
Memo. 1998-105.
Petitioner's role as an organizer dictated that he actually
perform, rather than merely prepare for, a substantial amount of
his important duties at the home office. From his home office,
essentially his center of operations, he carried out his
managerial and administrative duties. It was there that he
coordinated almost every logistical aspect of an upcoming
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concert. He also performed his duties as Hilton Head's
impresario from that location. Finally, he performed part of his
duties as a conductor, e.g., selecting the repertoire, at his
home office. His home office was therefore the point of delivery
of a substantial portion of his services.
Also important is the fact that petitioner spent the
majority of his working hours at his home office. This factor
bolsters the conclusion that petitioner's home office was not
just an ancillary place of business, but rather the principal
place of his business.
Having considered the importance of the activities performed
at petitioner's home office and the amount of time spent on such
activities, we are convinced that petitioner's principal place of
business was his home office.
In light of the foregoing, we hold that petitioners are
entitled to the deductions for home office and car and truck
expenses at issue herein.
To reflect our disposition of the disputed issue, as well as
petitioners' concessions,
Decision will be entered
under Rule 155.