Discussion:Deductibility of partner weekly breakfast meetings

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Discussion Forum Index --> Advanced Tax Questions --> Deductibility of partner weekly breakfast meetings


Discussion Forum Index --> Tax Questions --> Deductibility of partner weekly breakfast meetings

Rshinn2 (talk|edits) said:

4 October 2008

A quick search for "meals" on TaxAlamanc produces numerous quotes stating that partner meals (e.g. two partners discussing business over a weekly breakfast meeting) are deductible. However, I've scoured the tax code and treasury regulations (admittedly, I'm still learning my way around) and cannont find where the tax code specifically allows this deductions. I can only find discussion of meals related to travel, in relation to employee expenses or in connection with entertainment. Section 1.274-5T seems to state clearly that entertainment must involved clients or potential clients. Thus, it would not seem that the partner breakfast falls under the entertainment category. They are clearly not traveling and they are clearly not employees.

Can someone point me to where in the tax code this issue is addressed? Are there specific court cases that have dealt with this issue?

Thanks very much in advance.

Richard

CrowJD (talk|edits) said:

4 October 2008
I thought there was a Tax Court case where a group of law partners was denied this type of deduction. They were taking lunch together each day.

Harry Boscoe (talk|edits) said:

4 October 2008
*Maybe* the name of the court case about the law firm was "Moss"...? It was 25 or 30 years ago!

Rshinn2 (talk|edits) said:

4 October 2008
CrowJD,

You wouldn't be a famous bluegrass musician who just enjoys spending his free time studying tax law would you? :)

Would you have any idea how/where to search for such a case. I'm fairly new to this site. Does it have a function for searching the court cases?

Thanks much.

CrowJD (talk|edits) said:

4 October 2008
Here you go: In Moss v. Commissioner, 758 F.2d 211

(7th Cir.), cert. denied, 474 U.S. 979 (1985), the court denied a deduction for meal expenses incurred by law partners at lunchtime business meetings, even though the court assumed that these meetings were necessary to coordinate the firm's business and that lunch was the most convenient time because the lawyers were in court at other times during the day. The Tax Court, which was unanimous in denying the claimed deduction, observed in that case that "(d)aily meals are an inherently personal expense, and a taxpayer bears a heavy burden in proving they are routinely deductible" (80 T.C. 1073, 1078 (1983)).

CrowJD (talk|edits) said:

4 October 2008
No, I'm not a bluegrass musician. However, I've been known to get drunk and roll around in some Kentucky No. 36 Fescue. Only when it's a full moon though.

Rshinn2 (talk|edits) said:

4 October 2008
CrowJD,

TERRIFIC! Thanks so much. How did you find it and where did you look and can I read the actual case?

Richard

CrowJD (talk|edits) said:

4 October 2008
I just did a quick search, it's cited inside this case. http://www.usdoj.gov/osg/briefs/1988/sg880270.txt Just read down, and you'll see the cite.

Boscoe nailed it. I have not Sheparized it, but the theory seems valid, and I assume it's still good law.

Rshinn2 (talk|edits) said:

4 October 2008
CrowJD,

I got it. Took me a minute to remember about Google :)

Thanks again. Enjoy the Fescue.

Rich

Kevinh5 (talk|edits) said:

4 October 2008
sometimes TA members have been known to roll other than fescue

NYEA (talk|edits) said:

4 October 2008
There is a great line in Moss - "Indeed, if petitioner is correct, only the unimaginative would dine at their own expense."


There is some support for deducting OCCASIONAL (unfortunately this word is not defined) group meals in Wells TC Memo 1977-419 and Hankenson TC Memo 1984-200.

Harry Boscoe (talk|edits) said:

4 October 2008
I amaze myself:
** Moss v. Commissioner, (1985)

2. Facts: Moss is a partner in a Chicago law firm. The partners meet every day at lunch to go over their cases at a relatively modest restaurant that is local to the firm as well as the courthouse. The partners meet at lunch because it is convenient for them to do so during the court recess, but they could also meet at another time, and not have food. Generally, clients are not invited to the lunches - they are working lunches for the partners. Moss deducted the cost of the meals as an ordinary and necessary business expense. This was before section 274(n) was enacted. Section 262 and accompanying Regs 1.262.

Rshinn2 (talk|edits) said:

4 October 2008
All,

Thanks for all the good response. Harry, is your last post in support of deductibility or against?

I've just read the case. I'm no lawyer so I'm not a 100% I'm interpreting everything correctly. But, it does say Affirmed at the bottom and the text seems to me to pretty clearly state that the meals were not deductible.

In my particular case, the partners in question meet for a regular weekly breakfast meeting which, it seems to me, is essentially the same situation as Moss v. Commissioner. So, I'm thinking "dis-allowed".

Riley2 (talk|edits) said:

4 October 2008
Sec. 274(n) basically limits an allowable meal deduction to 50%, except as provided in 274(n). Agree that no deduction is allowed for daily meals.

JAD (talk|edits) said:

5 October 2008
Rshinn2, it seems to me that you are doing the agent's job for him. Instead of finding the similarities between your client and this case, how about looking for the distinguishing factors so that you can justify claiming the deduction? This is not a slam-dunk "no deduction allowed" situation. Are you about to tell your client that he can't claim the deduction based upon only one case and significant distinguishing facts? Daily vs weekly meals is a pretty big difference. Also, additional research may show cases that weigh in your client's favor.

Dblchai (talk|edits) said:

5 October 2008
In general, a meal or entertainment expense must have a "business purpose". I think the issue in Moss was the "every day" aspect of the expense. I'm pretty sure there is support out there for less frequent partner meal meeting being deductible as a 50% expense.

Harry Boscoe (talk|edits) said:

5 October 2008
Rshinn2: Sorry. My head was so swollen by the shock of remembering "Moss" after these 23 years that I copied and posted some ambiguous stuff that fails miserably to point out the court's conclusion which was that the partners' meals expenses were patently personal and certainly nondeductible.

Question: If you accept that these meal expenses are nondeductible do you then suggest to your client that they get charged to those partners who are eating the meals? Or do you just leave sleeping dogs lie, and leave the expenses as nondeductible operating expenses of the partnership/law firm, borne ratably by all the partners...?


Wiles (talk|edits) said:

16 August 2010
I have looked at Moss, Wells, Hankenson and others. I cannot find a case that the taxpayer won where they were meeting with partners once a week or once a month. It all boils downs to the IRS determining that they are more personal in nature, so they are not allowed.

Obviously, specific documentation would help. But arguing that a weekly or bi-weekly partner lunch meeting to discuss general business matters does not seem to fly.

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