Question

USE ONLY IRC 280A Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.

Jenny plans to run a home day care for children out of the first floor of her two story house this year. She has incurred a number of expenses to get the first floor ready for the daycare and has even signed 12 contracts with local parents to start day care services this year. She has applied for the certification to classify her home as a day care with the state but was rejected because of issues the state had with the day care facility part of her home.

A. Will Jenny be able deduct some portion of her home’s expenses related to her day care business this year?

B. Explain in one or two sentences only why you gave the answer to part A using the research resource you found. Make sure to cite the area of the resource you used.

Answer 1

A. No, Jenny will not be able to deduct any portion of her home’s expenses related to her day care business this year.

B. According to IRC 280A (c)(4)(A) and (c)(4)(B)(i), Jenny cannot deduct any expenses as the general rule is applicable to her day care because of the application to classify her home as a day care with the state was rejected. She is not eligible to receive any deduction on the items accruing for the period.

If her application to classify her home as a day care with the state was accepted, then her case would come under the exception list for 280A and she would have been eligible to claim deductions.