Category: Individuals Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com Taxpayer owns a motor home which he uses 80% for business. The taxpayer travels to various fairs for the purposes of selling merchandise. The taxpayer uses the motor home instead of renting a motel room. The issue is whether the taxpayer can properly depreciate the motor home and if so what is the appropriate life and method. If the taxpayer uses the motor home for more than 14 days during the year for personal purposes, it is clear that the taxpayer cannot depreciate the motor home, even though this result seems grossly unfair in the situation. A motor home is dwelling unit for purposes of Section 280A, the rules that govern business use of a residence. A mobile home is a dwelling unitSection 280A(f)(1)(A)and a motor home is the same as a mobile home. Loughlin v. U.S., 82-2 USTC ¶9543 (DC MN, 1982). I assume the taxpayer uses the motor home more than 14 days for personal purposes. If so, then the motor home is deemed to be a dwelling unit used as a residence and the restrictions of Section 280A apply. Expenses related to business use of a residence, including depreciation, are deductible if the expenses are allocable to a portion of the dwelling unit used exclusively on a regular basis and the dwelling unit is the principal place of business for any trade or business of the taxpayer. The exclusivity requirement is the problem here. I would have to assume that there is no portion of the motor home the taxpayer uses exclusively for business purposes. When the motor home is used for personal purposes, all the motor home is used for that purpose. There is a recent case applying the exclusivity rule to use of a motor home for an alleged business purpose. The case is C.H. Perry v. Comr., TC Memo 1996-194. Here, the taxpayer claimed to use a motor home in connection with managing his rental properties. The court found that the taxpayer did not meet his burden of proof with respect to business use of the motor home. The court added that even if the taxpayer had met his burden, the expenses related to the motor home would have been disallowed by Section 280A because no part of the home was used exclusively for business. In the event the taxpayer uses the property for personal purposes for 14 days or less, the depreciation method issue comes into play. Although a motor home does not clearly fit into any category, it seems to me to be five-year property by virtue of its similarity to a heavy truck (more than 13,000 pounds) and has a class life of 6 years under Rev. Proc. 87-56. I see no reason the alternative depreciation system under Section 168(g) could not be elected in this case. Note that an affirmative election is needed. If you make that choice, the motor home would be written off over the class life, six years, on a straight line basis. See IRC Section 168(g)(2)(c)(i). |
