TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, July 16, 2017

Tax Court Denies Business Expense Deductions To Minister/Author Due To Lack Of Profit Motive

Tax Court (2017)Forbes, IRS Rejects Minister Tax Write-Offs For Lack Of Profit Motive:

The U.S. Tax Court has agreed with the IRS that a minister and author could not deduct business expenses. Why? He was not engaged in a trade or business for profit. To top it off, the reverend also wasn't allowed any deductions under the more liberal hobby loss rules, because he had no gross income from these activities. The case is Lewis v. Commissioner, involving a minister and author named Willie Lewis. He occasionally performed weddings, attended meetings, and conducted seminars. On his 2011 tax return, he claimed business expenses from these activities. The IRS said no, assessed more taxes, and added penalties. So Mr. Lewis went to Tax Court.

The Tax Court found that Mr. Lewis was not engaged in a trade or business for profit. That meant the tax deductions he claimed for his ministry and book writing activities were limited to the amount of gross income he derived from those activities. It turned out that was zero, so he wasn't entitled to any deductions.

The court noted that Mr. Lewis admitted that he "didn't charge" for services he performed as a minister. Similarly, he didn't provide evidence showing that he had any income from his alleged book writing activity. He produced no accounting records, bank statements, invoices, or any other records traditionally associated with a business operating for a profit.

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