DEDUCTIONS FOR EXPENSES ATTRIBUTABLE TO BUSINESS USE OF HOMES, RENTAL OF VACATION HOMES, ETC.

SEC. 601. DEDUCTIONS FOR EXPENSES ATTRIBUTABLE TO BUSINESS USE OF HOMES, RENTAL OF VACATION HOMES, ETC. (a) Nondeductibility of Certain Expenses.— Part IX of subchapter B of chapter’ 1 (relating to items not deductible) is amended by adding at the end thereof the following new section: “SEC. 280A. DISALLOWANCE OF CERTAIN EXPENSES IN CONNECTION WITH BUSINESS USE OF HOME, RENTAL OF VACATION HOMES, ETC. “(a) General Rule.— Except as otherwise provided in this section, in the case of a taxpayer who is an individual or an electing small 90 STAT. 1570business corporation, no deduction otherwise allowable under this chapter shall be allowed with respect to the use of a dwelling unit which is used by the taxpayer during the taxable year as a residence. “(b) Exception fob Interest, Taxes, Casualty Losses, Etc.— Subsection (a) shall not apply to any deduction allowable to the tax-payer without regard to its connection with his trade or business (or with his income-producing activity). “(c) Exceptions for Certain Business or Rental Use; Limitation on Deductions for Such Use.— “(1) Certain business use.— Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis— “(A) as the taxpayer’s principal place of business, “(B) 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, or “(C) in the case of a separate structure which is not attached to the dwelling unit, in connection with the tax-payer’s trade or business. In tile case of an employee, the preceding sentence shall apply only if the exclusive use referred to in the preceding sentence is for the convenience of his employer. “(2) Certain storage use.— Subsection (a) shall not apply to any item to the extent such item is allocable to space within the dwelling unit which is used on a regular basis as a storage unit, for the inventory of the taxpayer held for use in the taxpayer’s trade or business of selling products at retail or wholesale, but only if the dwelling unit is the sole fixed location of such trade or business. “(3) Rental use.— Subsection (a) shall not apply to any item which is attributable to the rental of the dwelling unit or portion thereof (determined after the application of subsection (e)), “(4) Limitation on deductions.— In the case of a use described in paragraph (I) or (2). and in the case of a use described in paragraph (3) where the dwelling unit is used by the taxpayer during the taxable year as a residence, the deductions allowed under this chapter for the taxable year by reason of being attributed to such use shall not exceed the excess of— “(A) the gross income derived from such use for the taxable year, over “(B) the deductions allocable to such use which are allowable under this chapter for the taxable year whether or not such unit (or portion thereof) was so used. “(d) Use as Residence.— “(1) In general.— For purposes of this section, a taxpayer uses a dwelling unit during the taxable year as a residence if he uses such unit (or portion thereof) for personal purposes for a number of days which exceeds the greater of— “(A) 14 days, or “(B) 10 percent of the number of days during such year for which such unit is rented at a fair rental. For purposes of subparagraph (B), a unit shall not be treated as rented at a fair rental for any day for which it is used for personal purposes. “(2) Personal use of unit.— For purposes of this section, the taxpayer shall be deemed to have used a dwelling unit for per-90 STAT. 1571sonal purposes for a day if, for any part of such day, the unit is used— “(A) for personal purposes by the taxpayer or any other person who has an interest in such unit, or by any member of the family (as defined in section 267(c)(4)) of the tax-payer or such other person; “(B) by any individual who uses the unit under an arrangement which enables the taxpayer to use some other dwelling unit (whether or not a rental is charged for the use of such other unit); or “(C) by any individual (other than an employee with respect, to whose use section 119 applies), unless for such day the dwelling unit is rented for a rental which, under the facts and circumstances, is fair rental. The Secretary shall prescribe regulations with respect to the circumstances under which use of the unit for repairs and annual maintenance will not constitute personal use under this paragraph. “(e) Expenses Attributable to Rental.— “(1) In general.— In any case where a taxpayer who is an individual Or an electing small business corporation uses a dwelling unit for personal purposes on any day during the taxable year (whether or not he is treated under this section as using such unit as a residence), the amount deductible under this chapter with respect to expenses attributable to the rental of the unit (or portion thereof) for the taxable year shall not exceed an amount which bears the same relationship to such expenses as the number of days during each year that the unit (or portion thereof) is rented at a fair rental bears to the total number of days during such year that the unit (or portion thereof) is used. “(2) Exception for deduction otherwise allowable.— This subsection shall not apply with respect to deductions which would be allowable under this chapter for the taxable year whether or not such unit (or portion thereof) was rented. “(f) Definitions and Special Rules.— “(1) Dwelling unit defined.— For purposes of this section— “(A) In general.— The term ‘dwelling unit’ includes a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit. “(B) Exception.— The term ‘dwelling unit’ does not include that portion of a unit which is used exclusively as a hotel, motel, inn, or similar establishment. “(2) Personal use by electing shalt. business corporation.— In the case of an electing small business corporation, subparagraphs (A) and (B) of subsection (d)(2) shall be applied by substituting ‘any shareholder of the electing small business corporation’ for ‘the taxpayer’each place it appears. “(3) Coordination with section 183.— If subsection (a) applies with respect to any dwelling unit (or portion thereof) for the taxable year— “(A) section 183 (relating to activities not engaged in for profit) shall not apply to such unit (or portion thereof) for such year, but “(B) such year shall be taken into account as a taxable year for purposes of applying subsection (d) of section 183 (relating to 5-year presumption). 90 STAT. 1572 “(g) Special Hull for Certain Rental Use.— Notwithstanding any other provision of this section or section 183, if a dwelling unit is used during the taxable year by the taxpayer as a residence and such dwelling unit is actually rented for less than 15 days during the taxable year, then— “(1) no deduction otherwise allowable under this chapter because of the rental use of such dwelling unit shall be allowed, and “(2) the income derived from such use for the taxable year shall not be included in the gross income of such taxpayer under section 61” (b) Clerical Amendment.— The table of sections for such part IX is amended by adding at the end thereof the following new item: “Sec. 280A. Disallowance of certain expenses in connection with business use of borne, rental of vacation homes, etc.” (c) Effective Date.— The amendments made by this section shall apply 1° taxable years beginning after December 31, 1975.