1. Employee Expenses With Personal and Business Component [§21, §129].
Distinction Between Deductable Business or Investment Expenses and Nondeductible Personal, Living, or Family Expenses.
-Occurs when mixing personal pleasure with potentially deductable business.
-Much basic consumption performs some “income producing” function.
(Manager of clothing store, YSL, expected to wear YSL clothing at work. She wears while at work, while commuting, to fashion shows sponsored by YSL, and to business luncheons where she represents YSL. Regular customers use the clothing for general purposes; Manager is not a ‘normal’ purchaser of the clothing. Employer says OK to wear clothing away from work, manager does not wear them away from work, however.)
Issue: whether the manager of a clothing store is entitled to deduct as an ordinary and necessary business expense the cost of purchasing and maintaining YSL clothes and accessories worn by the taxpayer in her employment.?
Court disallowed deduction for payments by a businessman to a minister for business and personal advice based on prayer.
A position that entailed a “definite work assignment” and was not undertaken as a “tax dodge” would qualify as a trade or business and its expenses could be deducted.
Courts tend to be suspicious of any expense paid by an employee not reimbursed by the employer.
Decision to have a child is an inherently personal decision. If no child was had, no child care expenses would be incurred.
Transportation expenses, such as air fare, taxi fare, or the cost of operating a car, generally are deductable when the taxpayer is traveling on business.
Temporary place of business: a location at which the taxpayer performs services on an irregular or short-term basis.