The Supreme Court/The Supreme Court.iso/pc/ascii/1991/91_998/91_998.zc1

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SUPREME COURT OF THE UNITED STATES
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No. 91-998
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COMMISSIONER OF INTERNAL REVENUE, PETI-
TIONER v. NADER E. SOLIMAN
on writ of certiorari to the united states court
of appeals for the fourth circuit
[January 12, 1993]


  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.