Rents paid by self-employed

I own and operate a small schedule C business out of my rented home. When I moved in several years ago the landlord agreed to build onto the residence a new attached garage/shop to my specifications to serve the needs of my business. He gave me two rental contracts, one personally for the residence and another to me dba for the garage/shop. I have been deducting the shop portion of the rent as a business expense. This year I found it necessary to rent additional warehouse/shop space in a remote location as I am overflowing the home shop. I do still use the home shop for business. My questions: Can I still consider my business location my home even though I rent business property elsewhere? Can I deduct both rents as business expenses?

Can I deduct the mileage between my home shop and remote shop? And finally, while reading the instructions for 1099-misc (I sub-contracted some jobs to a competitor when I was too busy and am sending him a 1099-misc -- correct?) I noticed that it says under Box 1. Rents "Enter amounts of $600 or more for all types of rents ... paid for office space ... machine rentals ..." Should I be sending 1099's to my landlords? I haven't in the past. This seems rather far fetched. I've spoken with the business operators in the rented warehouses on either side of mine and they have never heard of such a thing. Yet the 1099-misc instructions does seem to say this. Also, I occasionally rent equipment from various competitors. Do I need to send them one for the rentals too? I don't have TIN's for any of these people. Thanks for your insight.

> > > > > > > > >

As to required information reporting for your rental payments, you are required to file a Form 1099-MISC with respect to your rental payments UNLESS you pay the rent to a real estate rental agent of the owner. See Treas. Reg.

1.6041-3(d). In other words, if you pay the rent directly to the property owner (or to any person other than a rental agent, e.g., a property manager who manages the real estate for the owner), you must file a Form 1099-MISC regarding the payment; conversely, if you make your rent payments to a property manager, you do not have to file a Form 1099-MISC. The instructions to Form 1099-MISC, on page one, state this conclusion in a somewhat ambiguous manner, by merely stating that payments to rental agents do not have to be reported on Form 1099-MISC, the negative implication being that any other payment of rent does have to be so reported.

As to your other questions, your "principal place of business" will generally be the place where you perform substantial administrative and management functions, i.e., your headquarters. In this case, that's most likely to be your home office, rather than your remote shop. See Code Sec. 280A(c)(1)(flush language). Your rental payments for both shops (the garage attached to your house and the remote shop) should both be deductible as ordinary and necessary business expenses, at least on the facts as described. Code Sec. 162. Your transportation expenses to and from your garage/shop and your remote shop are deductible, provided that you meet the required substantiation and record-keeping requirements. See, e.g., Rev. Rul. 99-7 (allowing deduction of costs of travelling between residence/principal place of business and another work location).