Jackson v. Comm'r of Internal Revenue
| Decision Date | 04 May 1981 |
| Docket Number | Docket No. 8601-79. |
| Citation | 76 T.C. 696 |
| Parties | ETHEL C. JACKSON, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioner, a licensed real estate salesperson, sells real estate through Walker & Lee, a licensed real estate broker. Walker & Lee provides office space for petitioner which she in fact used primarily for the purpose of acquiring new clients or listings. In 1976, petitioner also maintained an office in her home; clients occasionally met with her there, and copies of real estate transaction records kept there assisted petitioner in serving clients who called her at home. Held, in the circumstances of this case, petitioner's home office is not her principal place of business and is not regularly used as a place for meeting clients; she is therefore not entitled to deduct the expenses of maintaining an office in her home. Sec. 280A, I.R.C. 1954. Ethel C. Jackson, pro se.
Rosa Berman, for the respondent.
The Commissioner determined a $144 deficiency in petitioner's 1976 income tax. A portion of that deficiency is attributable to the Commissioner's disallowance of certain automobile expenses which petitioner does not contest. The only issue remaining for decision is whether petitioner, a licensed real estate salesperson, is entitled to a deduction for the cost of maintaining an office in her home.
Some of the facts have been stipulated. The stipulation of facts and related exhibits are incorporated herein by this reference.
At the time of the filing of her petition and in 1976, petitioner was a resident of Garden Grove, Calif.
Petitioner is licensed under California law to act as a real estate salesperson, and she has been engaged in this business since 1961. Until 1979, petitioner was associated with Walker & Lee, Inc., a licensed real estate broker. Petitioner herself is not a real estate broker. Under California law, she could not set up an office at home and work independently out of that office without a broker's supervision. Moreover, California law requires that her license be in the custody of the real estate broker under whom she is licensed, and, as required by California law, the business address on petitioner's license was that of Walker & Lee. Petitioner was not required nor could she, under the real estate regulations, keep original records of clients at home, although, as noted hereinafter, she does keep copies of such records at her home.
Notwithstanding that petitioner's written agreement with Walker & Lee designated her as an “independent contractor”—-and the Government does not challenge her status as such—-she does not in fact work for any broker other than Walker & Lee. Under that written agreement, she undertook to use her best efforts to sell real estate listed with Walker & Lee and to solicit additional listings and customers. Walker & Lee agreed to make real estate listings available to petitioner upon request, and to pay her the customary salesperson's commissions on her real estate transactions, after the collection of such commissions by Walker & Lee. Petitioner does not receive any commissions directly from the seller of property; such commissions are paid to Walker & Lee which in turn compensates petitioner. Walker & Lee also agreed to allow petitioner to use its office facilities. The agreement expressly provided that Walker & Lee had no authority to require petitioner to service any particular listings or to direct her hours, schedule, production, or means of carrying out her selling activities, except to the limited extent that California law imposes duties on a broker to exercise authority over its salespersons, such as the duty to exercise “reasonable supervision” over the activities of its salespersons. See Cal. Bus. & Prof. Code sec. 10177(h) (West Supp. 1981).
Petitioner lives alone in a three-bedroom home. She uses one room of her home as an office and has maintained an office in her home since 1963. The room thus utilized measures approximately 11 by 13 feet; it contains a desk, a sofa, a chair, as well as petitioner's files of the transactions she has been connected with in her years in the real estate business. It contains an extension of her home telephone, which is listed in her deceased husband's name. She has no business listing in the yellow pages, nor would she be permitted to have any such listing under California law. The room contains no television or entertainment facilities.
Petitioner's home is located some 8 miles from Walker & Lee's offices in the area she covers as a real estate salesperson, and her home office also offers a “relaxed atmosphere” for dealing with clients, including a fenced yard for clients' children. Moreover, the availability of copies of materials in the files at petitioner's home office improves the service that she is able to render to her clients who call in the evenings or weekends. However, the record fails to provide convincing evidence that clients in fact came to her home office other than on sporadic occasions.
The “main” office in respect of petitioner's real estate activities was that of Walker & Lee's in Los Alamitos, approximately 8 miles from her home in Garden Grove. She had access to a desk and a telephone in a large room in the front of the real estate office, which also contained a number of other desks occupied by sales personnel. Petitioner was not required to work out of Walker & Lee's office. However, as a means of acquiring new customers, petitioner spent approximately 12 to 16 hours per week in Walker & Lee's office answering customer telephone inquiries and meeting with potential customers who came in off the street. Furthermore, Walker & Lee's name was more prominently displayed on her business card than her own name, and contained the firm's address and telephone number; although it also contained her residence phone number, it did not contain her home address. Clients calling petitioner at Walker & Lee would be given her home phone number. As noted above, petitioner's home telephone is listed under the name of her late husband, and clients not in possession of her home phone number would have to call Walker & Lee's office to obtain her telephone number.
Much of petitioner's work involved activities outside of any office, such as taking potential buyers to visit property or holding “open houses.” If she obtained an offer, she might write up the deal at the house that was being shown. At times, the document was prepared in her automobile, or even at a restaurant. She did...
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