Mohamed Elbasha v. Comm., TCM 2022-001

Mohamed Elbasha worked as a contract emergency room doctor at Murray Medical Center in Chatsworth, Georgia. Dr. Elbasha testified that he had no office at Murray Medical Center and so exclusively used one room in, or 50% of, his condominium to do paperwork related to his emergency room duties.

Dr. Elbasha deducted $18,000 for a Schedule C rent/lease—other business property expense on his 2008 Form 1040. This deduction related to the use of his condominium as a home office. He provided a chart listing the hours each month he worked at home but could not explain how these hours translated to $18,000. IRS disallowed the amount in full.

Home office must be principal place of business. As Dr. Elbasha’s home office is not a separate structure from his dwelling unit, and no “patients, clients, or customers” met or dealt with him at his home office, the only test he may satisfy is the “principal place of business” test. (§280A(c)(1)(A))

The term “principal place of business” may include “a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business” (§280A(c)) “While a home office deduction is not subject to the strict substantiation requirements of §274(d), the taxpayers have a “heavy burden * * * to establish the deductibility of expenses related to a home office.” Crawford v. Comm., TCM 1993-192. When determining the proper amount of a reported home office expense, taxpayers should provide some proof of how they calculated the deduction.

Most of services at the hospital. Courts have held that when most of the services a taxpayer performs for patients are performed at hospitals with some follow-up at the home office, the home office does not constitute a principal place of business (Crawford v. Comm.) Dr. Elbasha also failed to substantiate the amount of his deduction. He could not remember how he calculated the $18,000 home office deduction and did not maintain sufficient records to decipher it. The Court found no corroborating evidence to show that Dr. Elbasha’s home office occupied half of his condominium. Dr. Elbasha did not provide the Court with pictures, floorplans, diagrams, or blueprints of his condominium or home office. Thus, the Court upheld the IRS’s disallowance of the home office deduction.

Also see.

Melvin Collins and Nikta Abdolrahim v. Comm., TCM 2020-50 where personal use of a portion of the office area in the home limited the loss amount.

Mark and Jennifer Weiderman v. Comm., TCM 2020-109 where a lack of records precluded a deduction for home office.