Innkeepers battle IRS over dual-use tax break

Property's business use must be 'exclusive,' judge says

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Editor's note: Robert Bruss is temporarily away. The following column from Bruss' "Best of" collection first appeared Sunday, May 7, 2006. Charles and Sandra Anderson bought the Eureka Street Bed and Breakfast Inn in Sutter Creek, Calif. They, and Sandra's parents, use part of the 5,664-square-foot house as their personal residence. Their bed-and-breakfast guests use the rest of the house. On their income-tax returns, the Andersons calculated 4,818 square feet for business use, resulting in 85 percent business use and 15 percent personal use. Purchase Bob Bruss reports online. But part of the main floor (lobby, registration area, office, kitchen, and laundry room) is "dual-use" by both the taxpayers and their guests. Upon audit, the Internal Revenue Service denied deductions for the 606 square feet of dual-use, resulting in $1,434 additional tax for the Andersons. They took their dispute to the U.S. Tax Court. If you were the U.S. tax court judge would you allow the ...