LOCATION: Center Moriches School District
DOCKET NO.: 91-998
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Fourth Circuit
CITATION: 506 US 168 (1993)
ARGUED: Oct 05, 1992
DECIDED: Jan 12, 1993
David M. Sokolow - on behalf of the Respondent
Kent L. Jones - on behalf of the Petitioner
Facts of the case
Media for Commissioner of Internal Revenue v. SolimanAudio Transcription for Oral Argument - October 05, 1992 in Commissioner of Internal Revenue v. Soliman
Audio Transcription for Opinion Announcement - January 12, 1993 in Commissioner of Internal Revenue v. Soliman
William H. Rehnquist:
The opinion of the Court No 91-998, Commission of internal revenue versus Soliman will be on announce by Justice Kennedy.
Anthony M. Kennedy:
This case requires us to consider the circumstances in which a taxpayer may claim a deduction on his federal income tax return for the expense of an office, that is located within the taxpayer's personal residence.
The case involves a medical doctor, who sought a deduction for a home office and the respondent, a doctor Solimon is an anesthesiologist.
During the tax year in question, which was 1983, he practice his profession in Maryland and Virginia, he spent 30 to 35 hours a week with patient at hospital and divided that time among three different hospitals.
At the hospitals the doctor administered the anesthesia, he cared for the patients after the surgery, and he treated the patients with pain.
Soliman lived in the condominium in the McLean, Virginia, the condominium contain the spare bedroom, which he used exclusively as an office.
He did not meet patients there.
He did spend two to three hours a day in the home office on a variety of tasks; such as contacting patients, surgeons, and hospitals by telephone, maintaining billing records and patients logs and preparing for treatments and presentations and satisfying continuing medical education requirements and reading medical journals and books.
On his 1983 income tax returns, Soliman claimed deductions that the portion of the condominium fees, utilities, and deppreciation attributable to the home office.
On audio, the Commissioner disallowed the deductions based upon his determination that his home office was not Soliman's principal place of business within the meaning of the Internal Revenue Code, and its the phrase "principal place of business" that must be construed to determinee this case.
Soliman petitioned the Tax Court for review, which ruled that the home office was Soliman's principal place of business.
On appeal, the Court of Appeals for the Fourth Circuit affirmed in a decision for a devided panel.
It adopted the test used by the Tax Court, and that test suggested that the presence of three factors must be given heavy weight in favor of finding that the home office is the principal place of business.
One that the home office is essential to the taxpayer's business; two that he spends a substantial amount of time there; and three that there is no other location available for the performance of the office functions of the business.
We granted certiorari and in an opinion filed with the Clerk, we reverse.
Contrary at the Court of Appeals suggestion the statute does not allow for deduction, whenever a home office maybe characterizes as legitimate in deciding whether a location is the principal place of business, a common sense mean of principle suggests that comparison of locations must be undertaken.
In determining the proper test for deciding whether a home office is the principal place of business, we cannot develop an objective formula that yields a clear answer in every case.
There are however two primary considerations in deciding whether a home office is a taxpayer's principal place of business: The relative importance of the activities performed at each business location and the time spent at each place.
As, part of this analysis the point where goods and services are delivered must be given great weight in determining the place where the most important functions are performed.
The practice of anesthesiology requires the medical doctor to treat patients under conditions demanding immediate personal observation, so exacting with these requirements that all of the respondent's patients were treated at hospitals, facilities with special characteristics designed to accommodate the demands of the profession.
Actual treatment was the essence of the professional service.
We consume that careful planning and study were required in advance of performing the treatment and all acknowledged that this was done on the home office, but the actual treatment was the most significant event in the professional transaction.
The comparison of the time spent by the taxpayer further supports the determination that the home office was not the principal place of business.
10-15 hours per weeks spent in the home office measured against the 30-35 hours per week at the three hospitals are insufficient to render the home office the principal place of business in light of the circumstances of this case.
That the office may have been essential is not controlling.
Hence, the taxpayer was not entitled the deduction for home expenses.
Justice Blackmun has filed a concurring opinion; Justice Thomas has filed an opinion concurring in the judgment in which Justice Scalia joins; Justice Stevens has filed a dissenting opinion.