Saturday, April 14, 2012
Tax Court Denies Attorney's $72k 'Business Development' Deduction for Costs of Attending Son's Equestrian Events
The Tax Court on Thursday denied an attorney's deduction of $72,000 of business development expenses incurred in attending equestrian events in which his son rode. Trupp v. Commissioner, T.C. Memo. 2012-108 (Apr. 12, 2012):
During the 1970s petitioner competed in equestrian events all over the country and was at one point considered for the U.S. Olympic Equestrian Team. He retired from riding shortly before entering law school at Tulane University, from which he graduated in 1981. He was admitted to the Florida Bar in 1981 and began to practice law as a litigator.
Petitioner’s son, Austin Trupp, began to ride in equestrian shows in the mid- 1990s around the age of 12. As a result of his son’s riding petitioner was drawn back into the sport, becoming president of an equestrian organization for two years and attending shows. Petitioner also began to represent clients in the equine industry. ...
Petitioner attended equestrian shows with his son throughout his son’s childhood, usually arriving Thursday night or Friday morning and leaving on Sunday. ... Petitioner testified that when he attended shows in which his son rode, petitioner was known as the attorney father of Austin Trupp. Petitioner testified that potential clients would approach him at the shows because of his ready availability to deal with their equine industry matters and that he had developed over 40 clients by going to shows from 1998 to the time of trial.
Petitioner did not purchase ringside banner advertisements or set up a table at the shows. He testified that only corporations bought banners and that he found the costs of a table outweighed the benefits. Instead of formally advertising, petitioner would stay ringside and watch his son or others riding. He also relied on word of mouth spreading when his son would place in the top 10 in an event, which resulted in Austin Trupp’s name being announced over the loudspeakers to the entire event. Petitioner believed that when people heard Austin Trupp’s name they “put two and two together” and thought of Robin Trupp, the equine industry attorney. ...
Petitioner agreed to pay certain equestrian-related expenses to people who allowed Austin Trupp to ride their horses at shows. Petitioner now claims $71,836 in deductible “Business Promotion” expenses as a result, including payments made for horse shoes, boarding, feeding, grooming, transportation, housing for the horses and various people on the farms, supplements, lessons, and insurance. Petitioner did not request that [his law firm] reimburse him for any of the equestrian-related expenses. ...
We find that petitioner’s equestrian activities were not engaged in for profit and therefore no expenses relating to them are deductible under § 162. ... In this case, petitioner did not ride horses himself and did nothing to increase his own exposure to potential clients. Petitioner stayed ringside while his son and others were riding, believing that when they heard his son’s name announced over the loudspeakers that they would think of petitioner and his equine industry law practice. ... [W]e believe petitioner failed to show a profit motive for his equestrian activities.