Article Date:
April 2006

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How the Business Condo Escapes the Tough Tax Rules

Has your tax return ever made you want to cry? If you run into the vacation-home, passive-loss, or entertainment-facility rules, all of which can severely alter or destroy tax results, you might be in tears.


Here is a bit of good news: The properly used business condo does not run up against those rules.


This article examines and explains the rules that apply to a business condo. These are the rules that grant you not only favorable, but also tax-protected treatment. We also explain why you have to pay close attention to how you use your condo and why you need to document that use.


Rules That Allow Business Use to Escape the Dreaded Vacation-Home Rules


Do you use your business condo solely for business lodging? If so, you escape the vacation-home rules and may deduct your business-lodging costs. The law is very clear on this. The vacation-home section of tax law, section 280A(f)(4), states that nothing in the vacation-home rules shall disallow any business deduction for business travel.


In other words, making your condo a business hotel and using it as a hotel for business travel does not trigger the vacation-home rules.


One exception to this business-lodging rule. The law does not grant the business-lodging exception to landlords who rent dwelling units. If you have apartment buildings or other residential rentals, staying at your condo to look after your rentals does not let you escape the unfavorable vacation-home rules.


In Andrews, the court noted that congressional floor debates discuss homes that qualify for deductible business lodging expenses.1 The floor debates note that members of Congress may deduct the business portion of their out-of-town lodging expenses while serving in the U. S. Congress.2 This means that members of Congress may deduct the business part of their Washington, D.C., homes because they use them for business travel.


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