Question

In which of the following independent situations is the taxpayer entitled to deduct expenses related to the home office?

a)A real estate agent employed by a local real estate agency owns several rental properties. She regularly and exclusively uses a second bedroom in her home solely as an office for bookkeeping and other activities related to management of the rental properties. She has no other place to perform these functions.
b)An attorney employed by a large law firm frequently brings work home from the office. She uses a study in her home for doing this work as well as managing her investment portfolio
c)Both statements are correct.
d)Neither statement is correct.

Answer 1

In situation a) of a real estate agent using a second bedroom in her home solely as an office for bookkeeping and other activities related to the management of rental properties, the taxpayer is entitled to deduct expenses related to the home office. However, in situation b) where an attorney uses a study in her home for bringing work from the office and managing her investment portfolio, the taxpayer is not entitled to deduct expenses related to the home office.

Step-by-step explanation:

The taxpayer is entitled to deduct expenses related to the home office in situation a) where a real estate agent uses a second bedroom in her home solely as an office for bookkeeping and other activities related to the management of rental properties, and has no other place to perform these functions. This meets the requirements of regularly and exclusively using a part of the home for business purposes. Therefore, statement a) is correct. In situation b), where an attorney uses a study in her home for bringing work from the office and managing her investment portfolio, this does not meet the exclusive use requirement because the study is used for personal reasons as well. Therefore, statement b) is not correct. Thus, the correct answer is c) Both statements are correct.