...Your home ... phone ... can all be paid for out of your business with pre-tax dollars ...
This particular tax position is highly questionable. For an "individual", "local telephone service with respect to the 1st telephone line provided to any residence of the taxpayer" is not deductible. 26 USC § 262(b). This statute, which was enacted by
PL 100–647 (1988) § 5073 ("Denial of Deduction for Certain Residential Telephone Service"), is clearly a bit dated and does not contemplate that in modern times, a taxpayer's only phone line might not strictly be "local telephone service", and might not literally be a "telephone line". It also applies only to an "individual". Nonetheless, the Tax Court has applied this statute to disallow telephone deductions by an S Corporation when there was no evidence that the individual taxpayer had any other phone line at his residence.
Rogers v. Commissioner,
TC Memo 2014-141, p 48. Although not explicitly stated by the Court, this might be justified because the shareholder of an S Corporation includes his share of the corporation's "items of ... deduction" in his own income, such that a limitation applicable to an "individual" may apply. 26 USC § 1366(a)(1)(A). The Court also did not concern itself with the dated wording of the statute. Even if the statute does not literally apply to certain "home ... phone" expenses, the Court may not look at them favourably in light of the policy behind the statute.
