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Friday, February 25, 2011

Tax Court Denies Deduction for TV News Anchor's Clothing Expenses

Hamper The Tax Court yesterday denied business expense deductions claimed by a TV news anchor for her wardrobe and other personal expenses and sustained accuracy-related penalties. Hamper v. Commissioner, T.C. Summ. Op. 2011-17 (Feb. 25, 2011) (citations omitted):

On Schedules A of her Federal income tax returns for the years at issue, petitioner claimed deductions for unreimbursed employee business expenses of $20,713, $18,604, $22,602, and $21,759, for 2005, 2006, 2007, and 2008, respectively. ....

During the years at issue petitioner was employed as a morning and noon television news anchor. As a television news anchor petitioner is required to maintain a specified professional appearance as described in the Women's Wardrobe Guidelines (guidelines). The guidelines provide that the "ideal in selecting an outfit for on-air use should be the selection of 'standard business wear', typical of that which one might wear on any business day in a normal office setting anywhere in the USA." ... The general guideline is that petitioner maintain a professional and conservative appearance. ...

Although a business wardrobe is a necessary condition of employment, the cost of the wardrobe has generally been considered a nondeductible personal expense pursuant to ยง 262.  The general rule is that where business clothes are suitable for general wear, a deduction for them is not allowable. Such costs are not deductible even when it has been shown that the particular clothes would not have been purchased but for the employment. .

There are recognized exceptions to the general rule where, for example, the clothing was useful only in the business environment in which the taxpayer worked. The rules for determining whether the cost of clothing is deductible as an ordinary and necessary business expense are: (1) The clothing is required or essential in the taxpayer's employment; (2) the clothing is not suitable for general or personal wear; and (3) the clothing is not so worn.

During the years at issue petitioner purchased clothing for her position as a news anchor. She wears her business clothing only at work and maintains her business clothing separately from her personal clothing. She explained that the requirement to wear conservative clothing makes her business clothing unsuitable for everyday wear.

Petitioner purchased most of her business clothing and accessories from typical clothing stores such as Nordstrom's, Kohl's, Victoria's Secret, Macy's, Old Navy, JCPenney, Sportmart, Casual Corner, DSW, Ann Taylor Loft, Dick's Sporting Goods, Marshall's, Charlotte Russe, and other local clothing stores.

Petitioner's clothing purchases for work consisted of such items as traditional business suits, lounge wear, a robe, sportswear, active wear, lingerie, cotton bikini and cotton thong underwear, and evening wear. She also deducted expenses for an Ohio State jersey, jewelry, bedding, running and walking shoes, and dry cleaning costs.

Petitioner used a self-described criterion for determining whether a clothing expense was deductible. She would ask herself "would I be buying this if I didn't have to wear this" to work, "and if the answer is no, then I know that I am buying it specifically" for work, and therefore, it is a deductible business expense.

Hynes v. Commissioner [74 T.C. 1266 (1980)], involved a taxpayer in circumstances very similar to petitioner's. The taxpayer in Hynes worked as a television news anchor and deducted business expenses for wardrobe, laundry and dry cleaning, haircuts and makeup, hotels and meals, and car expenses and depreciation. The taxpayer purchased a particular wardrobe that was restricted in terms of color and pattern that he was able to wear on the air. The Court reasoned that the restriction on the taxpayer's selection of business attire, however, was not significantly different from that applicable to other business professionals who must also limit their selection of clothing to conservative styles and fashions. The Court further reasoned that the fact that the taxpayer chose not to wear the business clothing while away from the station did not signal that the clothing was not suitable for private and personal wear. ...

Similarly, petitioner does not satisfy the requirement that her clothing not be suitable for everyday personal wear. Although she is required to purchase conservative business attire, it is not of a fashion that is outrageous or otherwise unsuitable for everyday personal wear. Given the nature of her expenditures, it is evident that petitioner's clothing is in fact suitable for everyday wear, even if it is not so worn. Consequently, the Court upholds respondent's determination that petitioner is not entitled to deduct expenses related to clothing, shoes, and accessory costs, as these are inherently personal expenses. Additionally, because the costs associated with the purchase of clothing are a nondeductible personal expense, costs for the maintenance of the clothing such as dry cleaning costs are also nondeductible personal expenses.

[The court also denied her claimed deductions for business gifts, cable television, car expenses, cell phone, contact lenses, cosmetics, gym memberships, haircuts, Internet access, makeup, manicures, meals, self-defense classes, satellite radio, subscriptions to newspapers and magazines (Cosmopolitan, Glamour, Newsweek, and Nickelodeon), and teeth whitening.]

Update:

http://taxprof.typepad.com/taxprof_blog/2011/02/tax-court.html

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» Hey, it's not cheap to look good on HDTV from Roth & Company, P.C.
Maybe the big-time TV anchors get their clothes custom-tailored for by the networks, but it doesn't work that way in... [Read More]

Tracked on Feb 25, 2011 9:46:58 AM

» Deducting special clothing costs from Don't Mess With Taxes
Sometimes when folks are desperately seeking tax deductions, they take allowable write-offs a little too far. Case in point, the tax returns of Anietra Y. Hamper. When Hamper was an anchor for morning and noon news programs at WBNS, Channel 10, in Colu... [Read More]

Tracked on Feb 26, 2011 4:09:32 PM

Comments

And what about those chosen few on TV who make millions but have their clothing supplier's name run on the program's end credits?

Posted by: Helen Holmes | Feb 25, 2011 3:48:21 PM

I know these rules apply also to film/television actors vis a vis wardrobe - but I am now somewhat concerned about the fact that "The court also denied her claimed deductions for business gifts, cable television, car expenses, cell phone, contact lenses, cosmetics, gym memberships, haircuts, Internet access, makeup, manicures, meals, self-defense classes, satellite radio, subscriptions to newspapers and magazines (Cosmopolitan, Glamour, Newsweek, and Nickelodeon), and teeth whitening." Of the above, we have been regularly told that we can deduct business miles for auditions etc. per normal mileage deduction rules, cell phone expenses as long as that phone is used exclusively for business calls or the percentage of monthly expense equivalent to percentage of business calls, meals on work trips, trade magazines such as "Hollywood Reporter" as well as movies rented or watched as long as a detailed log is kept of what the specific research was from each film watched. Are we now in trouble as far as those specific items or are freelance film actors still given those deductions as performing artists. This is getting so confusing. Even different accountants and agents within the IRS cannot seem to agree on this stuff.

Posted by: James | Feb 25, 2011 6:08:44 PM

Presumably, the costs for each of the various items of clothing were broken down and addressed separately. That being the case, what precisely was the argument for deductibility of the "cotton thong underwear"?

Jes' askin'.

Posted by: Stuart Levine | Feb 28, 2011 5:05:11 PM