Howard Payne University Home Office Qualifies for Deductions Memorandum

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tbyrin19

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Howard Payne University

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Hello, I need help with completing this project. Detailed instructions attached. Please be sure to follow them and answer appropriately especially the *RUBIC Guidelines (important*). Please provide in citation and a reference list or a website link (i.e. website, authors, etc.) at the end of the paper.

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READ: Publication 587, Business Use of Your Home Please be sure to read this 2020 version of Publication 587, since you are to assume a 2021 tax year for ALL milestone submissions as well as for the final project. https://www.irs.gov/publications/p587 The assignment requires you to write a short memorandum advising Nora on whether she can take any deductions for her home office, detailing your conclusion. You should also prepare a client letter (c below example). You are allowed to make some assumptions in order to document your findings but be sure to list those assumptions in your fact section of the research memorandum. ASSUME 2021. The IRS is asking the following about Nora’s home office deduction: “We see that you have taken a home office deduction on your individual return. Please provide evidence and support that qualifies you to take deductions regarding your prorated expenses associated with the square footage of your home. Please list out details regarding the specific deductions taken, why they were taken, and under what code section. Do you have an office at your bakery? Do you meet clients at your office? Did you verify any of these questions when claiming the deduction? Please list any further information gathered that supports this deduction.” You are not bound by the subsequent fact that Nora claimed the home office deduction when you make your recommendation in Milestone Three. Regardless of your recommendation, be sure there is sufficient detail in your tax research memorandum to support that alternative as well. CLIENT LETTER EXAMPLE
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Explanation & Answer

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Client Letter
Your Name
Address

Date

Nora
Address

Dear Nora,
Thank you for contacting us seeking advice concerning your home office deductions. I am
glad to let you know that you qualify for home office deductions.
My understanding of the facts is as follows. You own and operate CC bakery. You use a
home office for administrative duties like paying bills and ordering supplies. The home office
is 300 square feet in a house of 2000 square feet.
My research has discovered that to qualify for a home office deduction you have to pass
various tests as follows. The exclusive use test to determine if you qualify for the home
deductions. This requires you to use a specific place in your house for the business. Under
this test, you qualify for deduction since you use an identifiable space in your home to
conduct business.
You must pass the regular use test requirements. This test requires you to use the area
regularly. The other test is the business use test. Under this test, you must use the space in
your home to conduct business. The activities you carry out in your home office are
exclusively for your business. You, therefore, qualify under this test. Finally, the place must
be your principal place of business. To qualify for this test, you must use the space frequently
and exclusively for the administrative activities of your business. You should also not have
another fixed location where you carry out substantial administrative activities. You,
therefore, qualify under this test.
Your home office deductions can be calculated using the simplified method or the actual
expense method. Under the simplified method, the area in your home that qualifies as a home
office is multiplied by a prescribed rate of $5. The IRS p587 limits an area used for business
in the house t...


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