The Contemporary Tax Journal

Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Brown v. Commissioner, T.C. Memo. 2019-30, is a U.S. Tax Court case issued on April 8, 2019.

This case involved the IRC §162 business deduction for travel expense, where the couple were denied a deduction for the husband’s weekly travel expenses from his residence to an out-of-state business location, as he failed to prove that his residence was his “tax home.” An interesting fact is that the husband, who prepared the tax return, was a CPA with years of experience and training; likely indicating that these travel rules can be complex in some situations.

Deductible Travel Expenses for Business

IRC Section 162 allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Ordinary and necessary
business expenses include “traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while
away from home in the pursuit of a trade or business.” For example, travel fares, meals and lodging, and expenses incident to travel are treated as qualified business expenses. In order to
determine whether a taxpayer is “away from home,” the “tax home” must first be determined.1

Tax Home
Read More

Written by Annette Nellen | Posted in Travel Expenses Deduction

The Contemporary Tax Journal, Volume 9

Tax Treatment Of Business Expenses: By Madhuri Lanka, CMA, MST Student, San Jose State University

Introduction

This article discusses a 2020 Tax Court case involving the issue of when an expense should be treated as a start-up expense, trade or business expense, or as an income producing activity expense. This classification is crucial because the tax treatment of deductions is different for each category and therefore, affects taxpayer’s calculation of taxable income and tax liability. It is important to observe whether the expenses incurred by a company were before the commencement of business or once it started carrying on business. The purpose of this paper is to discuss these types of expenses by analyzing a 2020 court case and Internal Revenue Code (IRC) sections 162 (trade or business expenses), section 195 (start-up expenditures) and section 212 (income producing activity expenses).

James Gordon Primus v. Commissioner, TC Summary Opinion 2020-2

James G. Primus, a New York accountant, bought a property consisting of 200 acres of maple trees in Quebec, Canada in September 2011. A significant number of the trees were mature and ready to produce maple syrup. Before collecting sap and producing syrup, James G. Primus thinned the maple bush and subsequently installed a pipeline to produce syrup from sap. The production and sale of maple syrup began in 2017.
Read More

Written by Annette Nellen | Posted in TaxConnections • Volume 9