Tax Research

In: Business and Management

Submitted By fencyn77
Words 624
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Facts: Alex is a computer consultant, and his office is located in New York City, New York. During 2009, Alex and his wife, Aubrey, used their personal jet to travel to their lumber farm in Oregon 15 times a year. The lumber farm is operated in a business like fashion and is reported as a sole proprietorship on their Federal Form 1040. Using their personal jet, they traveled to seven computer symposia, to their Bora Bora property twice and stayed there for several weeks each time. They also traveled to Aspen, Colorado 8 times during the winter months to go skiing. The total annual costs of operating the jet, including depreciation, are $500,000.
Issue: Can Alex and Aubrey deduct the $500,000 annual costs of operating the jet as a business expenses?
Authorities: IRC Sec. 162 (a) (2); IRC Sec. 274 (d); IRC Sec. 262 (a) Rev. Proc. 2003-76, 2003-2 CB 924, 10/15/2003
Stanley M. Kurzet, et ux. v. Commissioner, TC Memo 1997-54 IR 296, 6/12/59.
Conclusion: Alex and Aubrey should be denied business deductions for their jet use $500,000: expense for jet travel to skiing and personal residence Bora Bora property and to non-business place Aspen, Colorado weren’t ordinary and necessary; But, taxpayers could deduct estimated travel expenses they would have incurred traveling from New York City to lumber farm, which taxpayer is reported as a sole proprietorship on the Federal Form 1040 and to various computer symposia.
Analysis: In general, the cost of travel is deductible if the primary purpose of the trip is business IRC Sec. 162 (a) (2). However, IRC Sec. 262 disallows any deduction for personal, living, or family expenses. According to IRC Sec 274, to determine which part of expenses related to business is deductible, a taxpayer must show records and documentary evidence that in combination are sufficient to establish each element of an expenditure…...

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