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From: courts@usenet.ins.cwru.edu
Newsgroups: freenet.govt.hermes.opinions,courts.usa.federal.supreme
Subject: No. 91-998.ZS Summary
Date: Tue Jan 12 11:11:49 1993

    

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued. 
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader. 
See United States v. Detroit Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

COMMISSIONER OF INTERNAL REVENUE v.
SOLIMAN
certiorari to the united states court of appeals for
the fourth circuit
No. 91-998.   Argued October 5, 1992-Decided January 12, 1993

During the 1983 tax year, respondent Soliman, an anesthesiologist,
 spent 30 to 35 hours per week administering anesthesia and postop-
 erative care in three hospitals, none of which provided him with an
 office.  He also spent two to three hours per day in a room in his
 home that he used exclusively as an office, where he did not meet
 patients but did perform a variety of tasks related to his medical
 practice.  His claimed federal income tax deduction for the portion
 of his household expenses attributable to the home office was disal-
 lowed by petitioner Commissioner, who determined that the office
 was not Soliman's ``principal place of business'' under 26 U.S.C.
 280A(c)(1)(A).  The Tax Court disagreed and allowed the deduction. 
 In affirming, the Court of Appeals adopted the test used in the Tax
 Court, under which a home office may qualify as the ``principal place
 of business'' if (1) the office is essential to the taxpayer's business; (2)
 the taxpayer spends a substantial amount of time there; and (3) there
 is no other location available for performance of the business' office
 functions.
Held:Soliman was not entitled to a deduction for home office expenses. 
 Pp. 4-10.
   (a)The test used by the Court of Appeals is rejected because it
 fails to undertake a comparative analysis of the taxpayer's various
 business locations.  This Court looks to words' ``ordinary, everyday
 senses'' in interpreting a revenue statute's meaning.   E. g., Malat v.
 Riddell, 383 U.S. 569, 571.  Section 280A(c)(1)(A) refers to the
 ``principal place of business,'' and both the common sense and diction-
 ary meanings of ``principal'' demonstrate that this constitutes the
 most important or significant place for the business, as determined
 through a comparison of all of the places where business is trans-
 acted.  Contrary to the Court of Appeals' suggestion, the statute
 does not allow for a deduction whenever a home office may be char-
 acterized as legitimate.  Pp. 4-6.   7   3                     
   (b)Although no one test is always determinative and each case
 turns upon its particular facts, there are two primary considerations
 in deciding whether a home office is the principal place of business. 
 First, the relative importance of the functions performed at each
 business location must be analyzed.  This requires, as a preliminary
 step, an objective description of the particular characteristics of the
 business in question.  If the nature of that business requires the
 taxpayer to meet or confer with a client or patient or to deliver goods
 or services to a customer, the place where that contact occurs, though
 not conclusive, must be given great weight.  Moreover, if the nature
 of the business requires that its services are rendered or its goods are
 delivered at a facility with unique or special characteristics, this is
 a further and weighty consideration.  Contrary to the Court of Ap-
 peals' ruling, the essentiality of the functions performed at home,
 while relevant, is not controlling, whereas the availability of alterna-
 tive office space is irrelevant.  Second-and particularly if the fore-
 going analysis yields no definitive answer-the decisionmaker should
 compare the amount of time spent at the home with the time spent in
 each of the other places where the business is transacted.  If the com-
 parative analysis required by the statute reveals that there is no
 principal place of business, the courts and the Commissioner should
 not strain to conclude that a home office qualifies by default.  Pp. 6-9.
   (c)Application of these principles demonstrates that Soliman's
 home office was not his principal place of business.  His home office
 activities, from an objective standpoint, must be regarded as less im-
 portant to his business than the tasks he performed at the hospitals. 
 The actual treatment of patients at these facilities having special
 characteristics was the essence of the professional service he provided
 and was therefore the most significant event in the professional
 transaction.  Moreover, the hours he spent in the home office, when
 compared to the time he spent at the hospitals, are insufficient to
 render the home office the principal place of business in light of all
 of the circumstances of this case.  P. 10.
935 F. 2d 52, reversed.
 Kennedy, J., delivered the opinion of the Court, in which Rehnquist,
C. J., and White, Blackmun, O'Connor, and Souter, JJ., joined. 
Blackmun, J., filed a concurring opinion.  Thomas, J., filed an opinion
concurring in the judgment, in which Scalia, J., joined.  Stevens, J.,
filed a dissenting opinion.


  Justice Kennedy delivered the opinion of the Court.
  We address in this decision the appropriate standard for
determining whether an office in the taxpayer's home
qualifies as his -principal place of business- under 26
U. S. C. 280A(c)(1)(A).  Because the standard followed
by the Court of Appeals for the Fourth Circuit failed to
undertake a comparative analysis of the various business
locations of the taxpayer in deciding whether the home
office was the principal place of business, we reverse.

                            I
  Respondent Nader E. Soliman, an anesthesiologist,
practiced his profession in Maryland and Virginia during
1983, the tax year in question.  Soliman spent 30 to 35   7   3                     
hours per week with patients, dividing that time among
three hospitals.  About 80 percent of the hospital time
was spent at Suburban Hospital in Bethesda, Maryland. 
At the hospitals, Soliman administered the anesthesia,
cared for patients after surgery, and treated patients for
pain.  None of the three hospitals provided him with an
office.
  Soliman lived in a condominium in McLean, Virginia. 
His residence had a spare bedroom which he used exclu-
sively as an office.  Although he did not meet patients in
the home office, Soliman spent two to three hours per day
there on a variety of tasks such as contacting patients,
surgeons, and hospitals by telephone; maintaining billing
records and patient logs; preparing for treatments and
presentations; satisfying continuing medical education
requirements; and reading medical journals and books.
  On his 1983 federal income tax return, Soliman claimed
deductions for the portion of condominium fees, utilities,
and depreciation attributable to the home office.  Upon
audit, the Commissioner disallowed those deductions based
upon his determination that the home office was not
Soliman's principal place of business.  Soliman filed a
petition in the Tax Court seeking review of the resulting
tax deficiency.
  The Tax Court, with six of its judges dissenting, ruled
that Soliman's home office was his principal place of
business.  94 T. C. 20 (1990).  After noting that in its
earlier decisions it identified the place where services are
performed and income is generated in order to determine
the principal place of business, the so-called -focal point
test,- the Tax Court abandoned that test, citing criticism
by two Courts of Appeals.  Id., at 24-25 (noting Meiers
v. Commissioner, 782 F. 2d 75 (CA7 1986); Weismann v.
Commissioner, 751 F. 2d 512 (CA2 1984); and Drucker v.
Commissioner, 715 F. 2d 67 (CA2 1983)).  Under a new
test, later summarized and adopted by the Court of
Appeals, the Tax Court allowed the deduction.  The
dissenting opinions criticized the majority for failing to
undertake a comparative analysis of Soliman's places of
business to establish which one was the principal place. 
94 T. C., at 33, 35.
  The Commissioner appealed to the Court of Appeals for
the Fourth Circuit.  A divided panel of that court af-
firmed.  935 F. 2d 52 (1991).  It adopted the test used in
the Tax Court and explained it as follows:

-[The] test . . . provides that where management or
administrative activities are essential to the taxpayer's
trade or business and the only available office space
is in the taxpayer's home, the `home office' can be his
`principal place of business,' with the existence of the
following factors weighing heavily in favor of a finding
that the taxpayer's `home office' is his `principal place
of business:'  (1) the office in the home is essential to
the taxpayer's business; (2) he spends a substantial   7   3                     
amount of time there; and (3) there is no other
location available for performance of the office func-
tions of the business.-  Id., at 54.

For further support, the Court of Appeals relied upon a
proposed IRS regulation related to home office deductions
for salespersons.  Under the proposed regulation, salesper-
sons would be entitled to home office deductions -even
though they spend most of their time on the road as long
as they spend `a substantial amount of time on paperwork
at home.'-  Ibid. (quoting Proposed Income Tax Reg.
1.280A-2(b)(3), 45 Fed. Reg. 52399 (1980), as amended,
48 Fed. Reg. 33320 (1983)).  While recognizing that the
proposed regulation was not binding on it, the court
suggested that it -evince[d] a policy to allow `home office'
deductions for taxpayers who maintain `legitimate' home
offices, even if the taxpayer does not spend a majority of
his time in the office.-  935 F. 2d, at 55.  The court
concluded that the Tax Court's test would lead to identifi-
cation of the -true headquarters of the business.-  Ibid. 
Like the dissenters in the Tax Court, Judge Phillips in his
dissent argued that the plain language of 280A(c)(1)(A)
requires a comparative analysis of the places of business
to assess which one is principal, an analysis that was not
undertaken by the majority.  Ibid.
  Although other Courts of Appeals have criticized the
focal point test, their approaches for determining the
principal place of business differ in significant ways from
the approach employed by the Court of Appeals in this
case, see Pomarantz v. Commissioner, 867 F. 2d 495, 497
(CA9 1988); Meiers v. Commissioner, supra, at 79;
Weissman v. Commissioner, supra, at 514-516; Drucker v.
Commissioner, supra, at 69.  Those other courts undertake
a comparative analysis of the functions performed at each
location.  We granted certiorari to resolve the conflict. 
503 U. S. ___ (1992).
                           II
                            A
  Section 162(a) of the Internal Revenue Code allows a
taxpayer to deduct -all the ordinary and necessary expens-
es paid or incurred . . . in carrying on any trade or
business.-  26 U. S. C. 162(a).  That provision is quali-
fied, however, by various limitations, including one that
prohibits otherwise allowable deductions -with respect to
the use of a dwelling unit which is used by the taxpayer
. . . as a residence.-  280A(a).  Taxpayers may nonethe-
less deduct expenses attributable to the business use of
their homes if they qualify for one or more of the statute's
exceptions to this disallowance.  The exception at issue in
this case is contained in 280A(c)(1):
-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 principal place of business for any
trade or business of the taxpayer.
      -(B) as a place of business which is used by pa-
tients, 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
taxpayer's trade or business.
-In the 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 em-
ployer.-  (Emphasis added.)
  Congress adopted 280A as part of the Tax Reform Act
of 1976.  Pub. L. No. 94-455, 94th Cong., 2d Sess.  Before
its adoption, expenses attributable to the business use of
a residence were deductible whenever they were -appropri-
ate and helpful- to the taxpayer's business.  See, e.g.,
Newi v. Commissioner, 432 F. 2d 998 (CA2 1970).  This
generous standard allowed many taxpayers to treat what
otherwise would have been nondeductible living and family
expenses as business expenses, even though the limited
business tasks performed in the dwelling resulted in few,
if any, additional or incremental costs to the taxpayer. 
H. R. Rep. No. 94-658, p. 160 (1975); S. Rep. No. 94-938,
p. 147 (1976).  Comparing the newly enacted section with
the previous one, the apparent purpose of 280A is to
provide a narrower scope for the deduction, but Congress
has provided no definition of -principal place of business.-
  In interpreting the meaning of the words in a revenue
act, we look to the -`ordinary, everyday senses'- of the
words.  Malat v. Riddell, 383 U. S. 569, 571 (1966) (per
curiam) (quoting Crane v. Commissioner, 331 U. S. 1, 6
(1947)).  In deciding whether a location is -the principal
place of business,-  the common sense meaning of -princi-
pal- suggests that a comparison of locations must be
undertaken.  This view is confirmed by the definition of
-principal,- which means -most important, consequential,
or influential.-  Webster's Third New International Dictio-
nary 1802 (1971).  Courts cannot assess whether any one
business location is the -most important, consequential,
or influential- one without comparing it to all the other
places where business is transacted.
  Contrary to the Court of Appeals' suggestion, the statute
does not allow for a deduction whenever a home office
may be characterized as legitimate.  See 935 F. 2d, at 55. 
That approach is not far removed from the -appropriate
and helpful- test that led to the adoption of 280A. 
Under the Court of Appeals' test, a home office may
qualify as the principal place of business whenever the
office is essential to the taxpayer's business, no alternative
office space is available, and the taxpayer spends a
substantial amount of time there.  See id., at 54.  This
approach ignores the question whether the home office is
more significant in the taxpayer's business than every
other place of business.  The statute does not refer to the
-principal office- of the business.  If it had used that
phrase, the taxpayer's deduction claim would turn on
other considerations.  The statute refers instead to the
-principal place- of business.  It follows that the most
important or significant place for the business must be
determined.

                            B
  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.  The inquiry is more subtle, with the ultimate
determination of the principal place of business being
dependent upon the particular facts of each 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 per-
formed at each business location and the time spent at
each place.
  Analysis of the relative importance of the functions
performed at each business location depends upon an
objective description of the business in question.  This
preliminary step is undertaken so that the decisionmaker
can evaluate the activities conducted at the various
business locations in light of the particular characteristics
of the specific business or trade at issue.  Although
variations are inevitable in case-by-case determinations,
any particular business is likely to have a pattern in
which certain activities are of most significance.  If the
nature of the trade or profession requires the taxpayer to
meet or confer with a client or patient or to deliver goods
or services to a customer, the place where that contact
occurs is often an important indicator of the principal
place of business.  A business location where these
contacts occur has sometimes been called the -focal point-
of the business and has been previously regarded by the
Tax Court as conclusive in ascertaining the principal place
of business.  See 94 T. C., at 24-25.  We think that
phrase has a metaphorical quality that can be misleading,
and, as we have said, no one test is determinative in
every case.  We decide, however, that the point where
goods and services are delivered must be given great
weight in determining the place where the most important
functions are performed.
  Section 280A itself recognizes that the home office gives
rise to a deduction whenever the office is regularly and
exclusively used -by patients, clients, or customers in
meeting or dealing with the taxpayer in the normal course
of his trade or business,- 280A(c)(1)(B).  In that circum-
stance, the deduction is allowed whether or not the home
office is also the principal place of business.  The taxpayer
argues that because the point of delivery of goods and
services is addressed in this provision, it follows that the
availability of the principal place of business exception
does not depend in any way upon whether the home office
is the point of delivery.  We agree with the ultimate
conclusion that visits by patients, clients, and customers
are not a required characteristic of a principal place of
business, but we disagree with the implication that
whether those visits occur is irrelevant.  That Congress
allowed the deduction where those visits occur in the
normal course even when some other location is the
principal place of business indicates their importance in
determining the nature and functions of any enterprise. 
Though not conclusive, the point where services are
rendered or goods delivered is a principal consideration in
most cases.  If the nature of the business requires that
its services are rendered or its goods are delivered at a
facility with unique or special characteristics, this is a
further and weighty consideration in finding that it is the
delivery point or facility, not the taxpayer's residence,
where the most important functions of the business are
undertaken.
  Unlike the Court of Appeals, we do not regard the
necessity of the functions performed at home as having
much weight in determining entitlement to the deduction. 
In many instances, planning and initial preparation for
performing a service or delivering goods are essential to
the ultimate performance of the service or delivery of the
goods, just as accounting and billing are often essential
at the final stages of the process.  But that is simply
because, in integrated transactions, all steps are essential. 
Whether the functions performed in the home office are
necessary to the business is relevant to the determination
of whether a home office is the principal place of business
in a particular case, but it is not controlling.  Essentiality,
then, is but part of the assessment of the relative impor-
tance of the functions performed at each of the competing
locations.
  We reject the Court of Appeals' reliance on the avail-
ability of alternative office space as an additional consider-
ation in determining a taxpayer's principal place of
business.  While that factor may be relevant in deciding
whether an employee taxpayer's use of a home office is
-for the convenience of his employer,- 280(c)(1), it has no
bearing on the inquiry whether a home office is the
principal place of business.  The requirements of particu-
lar trades or professions may preclude some taxpayers
from using a home office as the principal place of busi-
ness.  But any taxpayer's home office that meets the
criteria here set forth is the principal place of business
regardless of whether a different office exists or might
have been established elsewhere.
  In addition to measuring the relative importance of the
activities undertaken at each business location, the
decisionmaker should also compare the amount of time
spent at home with the time spent at other places where
business activities occur.  This factor assumes particular
significance when comparison of the importance of the
functions performed at various places yields no definitive
answer to the principal place of business inquiry.  This
may be the case when a taxpayer performs income-gener-
ating tasks at both his home office and some other
location.
  The comparative analysis of business locations required
by the statute may not result in every case in the specifi-
cation of which location is the principal place of business;
the only question that must be answered is whether the
home office so qualifies.  There may be cases when there
is no principal place of business, and the courts and the
Commissioner should not strain to conclude that a home
office qualifies for the deduction simply because no other
location seems to be the principal place.  The taxpayer's
house does not become a principal place of business by
default.
  Justice Cardozo's observation that in difficult questions
of deductibility -Life in all its fullness must supply the
answer to the riddle,- Welch v. Helvering, 290 U. S. 111,
115 (1933), must not deter us from deciding upon some
rules for the fair and consistent interpretation of a statute
that speaks in the most general of terms.  Yet we accept
his implicit assertion that there are limits to the guidance
from appellate courts in these cases.  The consequent
necessity to give considerable deference to the trier of fact
is but the law's recognition that the statute is designed
to accommodate myriad and ever changing forms of
business enterprise.

                           III
  Under the principles we have discussed, the taxpayer
was not entitled to a deduction for home office expenses. 
The practice of anesthesiology requires the medical doctor
to treat patients under conditions demanding immediate,
personal observation.  So exacting were these require-
ments that all of respondent's patients were treated at
hospitals, facilities with special characteristics designed to
accommodate the demands of the profession.  The actual
treatment was the essence of the professional service.  We
can assume that careful planning and study were required
in advance of performing the treatment, and all acknowl-
edge that this was done in the home office.  But the
actual treatment was the most significant event in the
professional transaction.  The home office activities, from
an objective standpoint, must be regarded as less impor-
tant to the business of the taxpayer than the tasks he
performed at the hospital.
  A comparison of the time spent by the taxpayer further
supports a determination that the home office was not the
principal place of business.  The 10 to 15 hours per week
spent in the home office measured against the 30 to 35
hours per week at the three hospitals are insufficient to
render the home office the principal place of business in
light of all of the circumstances of this case.  That the
office may have been essential is not controlling.
  The judgment of the Court of Appeals is reversed.

                                      It is so ordered.



  Justice Blackmun, concurring.
  I join the Court's opinion but add these few words
primarily to fortify my own conclusions:
  This case concerns 280A(c)(1)(A) of the Internal Reve-
nue Code, 26 U. S. C. 280A(c)(1)(A).  A deduction from
gross income is a matter of grace, not of right, Commis-
sioner v. Sullivan, 356 U. S. 27, 28 (1958); Commissioner
v. Tellier, 383 U. S. 687, 693 (1966), so that our analysis
starts with an assumption of nondeductibility.  Precise
exceptions to this are then provided by the statute.
  Although he is a licensed physician who treats patients,
respondent finds no solace in subsection (B) of
280A(c)(1).  Subsection (B) requires that the place of
business be -used by patients . . . in meeting or dealing
with the taxpayer,- a factual element that is lacking here
unless the physician-taxpayer's papers, records, and
telephone calls are to be deemed to personify the patient
in the office.  Such an interpretation, in my view, would
stretch the statute too far.
  Respondent is thus confined to subsection (A), which
uses the vital words -principal place of business.-  As
Justice Kennedy points out, this phrase invites and
compels a comparison, an exercise the Court of Appeals
did not undertake.  When comparison is made, this
taxpayer loses his quest for a deduction.  The bulk of his
professional time and performance is spent in the hospi-
tals.  By any measure, the greater part of his remunera-
tion is generated and earned there.  His home office well
may be important, even essential, to his professional
activity, but it is not -principal.-  The fact that it is his
primary, perhaps his only, office is not in itself enough.
  This result is compelled by the language of the statute. 
Congress must change the statute's words if a different
result is desired as a matter of tax policy.



  Justice Thomas, with whom Justice Scalia joins,
concurring in the judgment.
  Today the Court announces that -there is no one test,-
ante, at 7, to determine whether a home office constitutes
a taxpayer's -principal place of business- within the
meaning of 26 U. S. C. 280A(c)(1)(A), and concludes that
whether a taxpayer will be entitled to a home office
deduction will be -dependent upon the particular facts of
each case,- ante, at 6.  The Court sets out two -primary
considerations,- ibid., to guide the analysis-the impor-
tance of the functions performed at each business location
and the time spent at each location.  I think this inquiry,
-subtle- though it may be, ibid., will unnecessarily require
the lower courts to conduct full-blown evidentiary hearings
each time the Commissioner challenges a deduction under
280A(c)(1)(A).  Moreover, as structured, the Court's -test-
fails to provide clear guidance as to how the two-factor
inquiry should proceed.  Specifically, it is unclear whether
the time element and importance-of-the-functions element
are of equal significance.  I write separately because I
believe that in the overwhelming majority of cases (includ-
ing the one before us), the -focal point- test-which


emphasizes the place where the taxpayer renders the
services for which he is paid or sells his goods-provides
a clear, reliable method for determining whether a tax-
payer's home office is his -principal place of business.- 
I would employ the totality-of-the-circumstances inquiry,
guided by the two factors discussed by the Court, only in
the small minority of cases where the home office is one
of several locations where goods or services are delivered,
and thus also one of the multiple locations where income
is generated.
  I certainly agree that the word -principal- connotes
-`most important,'- ante, at 5, but I do not agree that this
definition requires courts in every case to resort to a
totality-of-the-circumstances analysis when determining
whether the taxpayer is entitled to a home office deduc-
tion under 280A(c)(1)(A).  Rather, I think it is logical to
assume that the single location where the taxpayer's
business income is generated-i.e., where he provides
goods or services to clients or customers-will be his
principal place of business.  This focal point standard was
first enunciated in Baie v. Commissioner, 74 T. C. 105
(1980), and has been consistently applied by the Tax
Court (until the present case) in determining whether a
taxpayer's home office is his principal place of business.
  Indeed, if one were to glance quickly through the
Court's opinion today, one might think the Court was in
fact adopting the focal point test.  At two points in its
opinion the Court hails the usefulness of the focal point
inquiry: It states that the place where goods are delivered
or services rendered must be given -great weight in deter-
mining the place where the most important functions are
performed,-  ante, at 7, and that -the point where services
are rendered or goods delivered is a principal consider-
ation in most cases,- ante, at 8.  In fact, the Court's
discomfort with the focal point test seems to rest on two
fallacies-or perhaps one fallacy and a terminological
obstinacy.  First, the Court rejects the focal point test
because -no one test . . . is determinative in every case.- 
Ante, at 7.  But the focal point test, as I interpret it, is
not always determinative:  where it provides no single
principal place of business, the -totality of the circum-
stances- approach is invoked.  Second, the Court rejects
the focal point test because its name has a  -metaphorical
quality that can be misleading.-  Ibid.  But rechristening
it the -place of sale or service test--or whatever label the
Court would find less confusing-is surely a simple
matter.
  The Commissioner's quarrel with the focal point test is
that -it ignores management functions.-  Tr. of Oral Arg.
24.  To illustrate this point, the Commissioner at oral
argument presented the example of a sole proprietor who
runs a rental car company with many licensees around
the country, and who manages the licensees from his
home, advising them on how to operate the businesses. 
Yet the Commissioner's unease is unfounded, since the
focal point inquiry easily resolves this example.  The
taxpayer derives his income from managing his licensees,
and he performs those services at his home office.  Thus,
his home office would be his -principal place of business-
under 280A(c)(1)(A).  On the other hand, if the taxpayer
owned several car dealerships and used his home office
to do the dealership's bookkeeping, he would not be enti-
tled to deduct the expenses of his home office even if he
spent the majority of his time there.  This is because the
focal points of that business would be the dealerships
where the cars are sold-i.e., where the taxpayer sells the
goods for which he is paid.
  There will, of course, be the extraordinary cases where
the focal point inquiry will provide no answer.  One
example is the sole proprietor who buys jewelry wholesale
through a home office, and sells it both at various craft
shows and through mail orders out of his home office.  In
that case, the focal point test would yield more than one
location where income is generated, including the home. 
Where the taxpayer's business involves multiple points of
sale, a court would need to fall back on a totality-of-the-
circumstances analysis.  That inquiry would be rationally
guided, of course, by the two factors set out in the Court's
opinion: an analysis of the relative importance of the
functions performed at each business location and the
time spent at each.  The error of the Tax Court's original
construction of the focal point test was the implicit view
that the test allowed no escape valve.  Clearly it must. 
Nevertheless, since in the vast majority of cases the focal
point inquiry will provide a quick, objective, and reliable
method of ascertaining a taxpayer's -principal place of
business,-  I think the Court errs today in not unequivo-
cally adopting it.
  The difficulty with the Court's two-part test can be seen
in its application to the facts of this case.  It is uncon-
tested that the taxpayer is paid to provide one service-
anesthesiology.  It is also undisputed that he performs
this service at several different hospitals.  At this junc-
ture, under the focal point test, a lower court's inquiry
would be complete: on these facts, the taxpayer's home
office would not qualify for the 280A(c)(1)(A) deduction. 
Yet under the Court's formulation, the lower court's
inquiry has only just begun.  It would need to hear
evidence regarding the types of business activities per-
formed at the home office and the relative amount of time
the taxpayer spends there.  It just so happens that in this
case the taxpayer spent 30 to 35 hours per week at the
hospitals where he worked.  But how would a court
answer the 280A(c)(1)(A) question under the standard
announced today if the facts were altered slightly, so that
the taxpayer spent 30 to 35 hours at his home office and
only 10 hours actually performing the service of anesthe-
siology at the various hospitals?  Which factor would take
precedence?  The importance of the activities undertaken
at the home compared to those at the hospitals?  The
number of hours spent at each location?  I am at a loss,
and I am afraid the taxpayer, his attorney, and a lower
court would be as well.
  We granted certiorari to clarify a recurring question of
tax law that has been the subject of considerable disagree-
ment.  Unfortunately, this issue is no clearer today than
it was before we granted certiorari.  I therefore concur
only in the Court's judgment.



  Justice Stevens, dissenting.
  Respondent is self-employed.  He pays the ordinary and
necessary expenses associated with the operation of his
office in McLean, Virginia; it is the only place of business
that he maintains.  In my opinion the Tax Court and the
Court of Appeals correctly concluded that respondent is
entitled to an income tax deduction for the cost of main-
taining that office.  This Court's contrary conclusion
misreads the term -principal place of business- in 280A
of the Internal Revenue Code, deviates from Congress'
purpose in enacting that provision, and unfairly denies an
intended benefit to the growing number of self-employed
taxpayers who manage their businesses from a home
office.
                            I
  This case involves an exception to the general rule that
-ordinary and necessary- business expenses are deduct-
ible.  There is no dispute that the expenses at issue fall
within that general category.  They are questioned only
because the office is located within respondent's residence. 
If that office were located in any other place-even in
someone else's home-the general rule would apply, and
respondent could have deducted the costs of its mainte-
nance.  If he had been prosperous enough to own a house
and property on which a separate structure was located,
he could have maintained that structure as an office and
deducted the costs.  If his business were so structured
that he met regularly with clients and patients at his
home office, he also could have deducted the costs.  And
if he spent two or three hours a day in his home office
and a similar amount of time in each of three or four

separate hospitals he might also be able to deduct the
costs; at least the Court's opinion does not begin to
explain how the deduction of the costs in that case might
be denied, except to insist that -[t]he taxpayer's house
does not become a principal place of business by default.- 
See ante, at 9.  Because respondent chose to preserve one
room in his home as an office, however, and because his
business was so arranged that he spent most (though by
no means all) of his working hours at one hospital, the
Court holds that the costs of its maintenance may not be
deducted.
  Deductions, as Justice Blackmun notes, ante, at 1, are
a matter of legislative grace, but that is no reason to read
into them unnecessary restrictions that result in the
unequal treatment of similarly situated taxpayers.  Such
unfair treatment could, of course, have been required by
the tax code, if Congress had wanted, for example, to
discourage parents from working at home; to promote the
construction of office buildings or separate structures on
residential real estate; or to encourage hospitals to keep
doctors near their patients.  We have no reason to think
that Congress intended any such results.  It is clear, in
fact, that Congress intended only to prevent deductions for
home offices that were not genuinely necessary business
expenses.  Because the tests Congress imposed to prevent
abuse do not require us to deny respondent's claimed
deductions for his home office, I would affirm the decision
of the Court of Appeals.

                           II
  Before 1976, home office deductions were allowed
whenever the use of the office was -appropriate and
helpful- to the taxpayer.  That generous standard was
subject to both abuse and criticism; it allowed homeowners
to take deductions for personal expenses that would have
been incurred even if no office were maintained at home
and its vagueness made it difficult to administer.  It was
particularly favorable to employees who worked at home
on evenings and weekends even though they had adequate
office facilities at their employer's place of business.  In
response to these criticisms, Congress enacted 280A to
prohibit deductions for business uses of dwelling units
unless certain specific conditions are satisfied.
  The most stringent conditions in 280A, enacted to
prevent abuse by those who wanted to deduct purely
residential costs, apply to deductions claimed by employ-
ees.  This provision alone prevents improper deduction
for any second office located at home and used merely for
the taxpayer's convenience.  It thus responds to the major
concern of the Commissioner identified in the legislative
history.
  Self-employed persons, such as respondent, must satisfy
three conditions.  Each is more strict and more definite
than the -appropriate and helpful- standard that Congress
rejected.
  First, a portion of the dwelling unit must be used
-exclusively- for a business purpose.  The Commissioner's
proposed regulations construe the exclusive use require-
ment with appropriate strictness.  They state that a
portion of a dwelling unit is used exclusively -only if
there is no use of that portion of the unit at any time
during the taxable year other than for business pur-
poses.-  This requirement is itself sufficient to eliminate
many of the abuses associated with the pre-1976 -appro-
priate and helpful- standard; the taxpayer must now
entirely devote a separately identifiable space, usually an
entire room, to his business.  Respondent strictly satis-
fied that condition in this case.
  Second, the portion of the dwelling unit that is set aside
for exclusive business use must be so -used on a regular
basis.-  Although this condition is not as specific as the
-exclusive use- requirement, it obviously requires that the
use be substantial.  In this case respondent spent two or
three hours a day in his office communicating with
surgeons, patients, insurance companies, and hospitals;
doing his bookkeeping; handling his correspondence; and
preparing himself for his professional assignments at other
locations.  He received business calls on his office answer-
ing machine and, of course, his business mail was ad-
dressed to that office.  Again, because these uses occurred
on a regular basis, it is undisputed that respondent has
satisfied this requirement.
  Third, the use of the space must be as a -place of
business- satisfying one of three alternative requirements. 
It must be used as:
-(A) the principal place of business for any trade or
business of the taxpayer.-
-(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 busi-
ness, or
-(C) in the case of a separate structure which is not
attached to the dwelling unit, in connection with the
taxpayer's trade or business.- 26 U. S. C. 280A(c)(1)
(emphasis added)
Subsection (C) is obviously irrelevant in this case, as is
subsection (B).  The office itself is not a separate struc-
ture, and respondent does not meet his patients there. 
Each of the three alternatives, however, has individual
significance, and it is clear that subsection (A) was
included to describe places where the taxpayer does not
normally meet with patients, clients, or customers. 
Nevertheless, the Court suggests that Soliman's failure to
meet patients in his home office supports its holding. 
It does not.  By injecting a requirement of subsection (B)
into subsection (A) the Court renders the latter alternative
entirely superfluous.  Moreover, it sets the three subsec-
tions on unequal footing: subsection (A) will rarely apply
unless it includes subsection (B); subsection (B) is preemi-
nent; and the logic of the Court's analysis would allow a
future court to discover that, under subsection (C), a
separate structure is not truly -separate- (as a principal
place of business is not truly -principal-) unless it is also
the site of meetings with patients or clients.
  The meaning of -principal place of business- may not
be absolutely clear, but it is absolutely clear that a
taxpayer may deduct costs associated with his home office
if it is his principal place of business or if it is a place of
business used by patients in the normal course of his
business or if it is located in a separate structure used in
connection with his business.  A home office could, of
course, satisfy all three requirements, but to suggest that
it need always satisfy subsection (B), or even that whether
it satisfies (B) has anything to do with whether it satisfies
(A), encourages the misapplication of a relatively simple
provision of the Revenue Code.
  By conflating subsections (A) and (B) the Court makes
the same mistake the courts of appeal refused to make
when they rejected the Tax Court's -focal point- test,
which proved both unworkable and unfaithful to the
statute.  In this case the Tax Court itself rejected that
test because it -merges the `principal place of business'
exception with the `meeting clients' exception . . . from
section 280A.-  94 T. C. 20, 25 (1990).  The Court today
steps blithely into territory in which several courts of
appeal and the Tax Court, whose experience in these
matters is much greater than ours, have learned not to
tread; in so doing it reads into the statute a limitation
Congress never meant to impose.
  The principal office of a self-employed person's business
would seem to me to be the most typical example of a
-principal place of business.-  It is, indeed, the precise
example used in the Commissioner's proposed regulations
of deductible home offices for taxpayers like respondent,
who have no office space at the -focal point- of their
work.  Moreover, it is a mistake to focus attention
entirely on the adjective -principal- and to overlook the
significance of the term -place of business.-  When the
term -principal place of business- is used in other statutes
that establish the jurisdiction or venue in which a corpo-
rate defendant may be sued, it commonly identifies the
headquarters of the business.  The only place where a
business is managed is fairly described as its -principal-
place of business.
  The Court suggests that Congress would have used the
term -principal office- if it had intended to describe a
home office like respondent's.  Ante, at 6.  It is probable,
however, that Congress did not select the narrower term
because it did not want to exclude some business uses of
dwelling units that should qualify for the deduction even
though they are not offices.  Because some examples that
do not constitute offices come readily to mind--an artist's
studio, or a cabinet-maker's basement-it is easy to
understand why Congress did not limit this category that
narrowly.
  The test applied by the Tax Court, and adopted by the
Court of Appeals, is both true to the statute and prac-
tically incapable of abuse.  In addition to the requirements
of exclusive and regular use, those courts would require
that the taxpayer's home office be essential to his business
and be the only office space available to him.  935 F. 2d
52, 54 (CA4 1991); 94 T. C., at 29.  Respondent's home
office is the only place where he can perform the adminis-
trative functions essential to his business.  Because he is
not employed by the hospitals where he works, and
because none of those hospitals offers him an office,
respondent must pay all the costs necessary for him to
have any office at all.  In my judgment, a principal place
of business is a place maintained by or (in the rare case)
for the business.  As I would construe the statute in this
context, respondent's office is not just the -principal- place
of his trade or business; it is the only place of his trade
or business.
  Nothing in the history of this statute provides an
acceptable explanation for disallowing a deduction for the
expense of maintaining an office that is used exclusively
for business purposes, that is regularly so used, and that
is the only place available to the taxpayer for the manage-
ment of his business.  A self-employed person's efficient
use of his or her resources should be encouraged by sound
tax policy.  When it is clear that no risk of the kind of
abuse that led to the enactment of 280A is present, and
when the taxpayer has satisfied a reasonable, even a
strict, construction of each of the conditions set forth in
280A, a deduction should be allowed for the ordinary cost
of maintaining his home office.
  In my judgment, the Court's contrary conclusion in this
case will breed uncertainty in the law, frustrate a
primary purpose of the statute, and unfairly penalize
deserving taxpayers.  Given the growing importance of
home offices, the result is most unfortunate.
  I respectfully dissent.
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