Jackson, Tax Court Memo. 2014-160
The taxpayer was an insurance agent who specialized in selling insurance policies specific to recreational vehicles (RVs). To gain access to RV owners, the taxpayer was a member of several RV clubs. The clubs held RV rallies which were primarily social events. Only RV owners could attend these rallies. Ownership was also required by certain RV parks, which often prohibited RV’s older than a certain age.
The taxpayer gathered sales leads at every rally. He attached to his RV advertisement promoting his insurance business. He invited potential customers to come to his RV and discuss the prospective client’s insurance needs. It would often take months, if not years, for a relationship with a potential customer to develop into an actual sale.
The court stated there was no question the taxpayer used his RV for some personal purposes. The taxpayer claimed, however, that he was entitled to deductions related to the business use of his RV.
The court acknowledged that the taxpayer actively sold insurance polocies during his time at the rallies, and that business activities conducted in using his RV generated a significant amount of revenue. After reviewing the evidence in the record and considering the taxpayer’s testimony, the court concluded that the taxpayer spent two-thirds of his time during these rallies on business and one-third of his time for personal pleasure. Thus, the primary use of the RV was for business, not pleasure. However, none of the deductions for the business use was allowed because of IRC section 280A.
The Tax Court has previously ruled that an RV qualifies as a dwelling unit for purposes of the office-in-home rules under IRC section 280A. Under the general rule, any personal use, including watching TV in the RV, makes the entire day a personal day. IRC section 280A(c) has an exception to this general rule which allows a taxpayer to allocate costs to business use if a portion of the dwelling unit is “exclusively used” on a regular basis “as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business.” The court said exclusivity is the key to this case. The taxpayer did not use any portion of his RV exclusively for business. Therefore, no deduction for the expenses allocated to the business use is allowed.