Beware Home Office Income Tax Deduction

The home office income tax deduction has formed the basis for a denial in part of the Florida homestead exemption.   More specifically, there is now case authority that the exclusive use of a portion of a Florida homestead which in part can be evidenced by the home office income tax deduction and depreciation of the home  justifies apportioning the residence to homestead and non- homestead.  The idea is as follows:  Suppose 25% of the home is exclusively used for business such as an office.  Or assume that 25% is exclusively used by a tenant who is paying rent for one room in the home.   The trustee can sell the home, 75% of the equity belongs to the debtor, and 25% of the net proceeds would be retained by the trustee.

Sounds contrary to the whole idea of the liberal protections for a Florida homestead? Sounds contrary to the principles in prior case law? Am I making this up like a law school exam? (I am not discussing a duplex or 4-unit building where the debtor only resides in one unit;  or a night club where the debtor lives in the office on the second floor.  I am discussing a single family residence.  I am also stressing the key finding of “exclusive” use of a portion of the residence.)

See In re Shaker, Case No.  13-29172, DE 59(March 11, 2014)(J. Hyman, West Palm Beach Division).  Note this case did involve  6-figure equity and an appeal was dismissed based on a settlement.

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