Your challenge in the discussion for this week relates to practice at tax research. Below I will give you a tax scenario that has been decided by the U.S. Tax Court. To meet the challenge, you must post as usual by midnight on Friday answers to the following questions:
- What type of opinion by the Tax Court was this?
- What is the name of the opinion and citation?
- What was the opinion of the Court as to issue 2 which is covered in my fact scenario? Ignore issue 1 found in the decision.
- In your opinion, was the decision fair?
- What did you learn about doing tax research?
Petitioner was a professional bodybuilder. In this activity, petitioner lifted weights, posed to display his muscular finesse, trained other bodybuilders, and gave seminars. Petitioner won awards and received at least one endorsement from a supplement manufacturer for which he received supplements valued at $100 per month.
Petitioner’s income from this activity, therefore, came from posing, seminars, publication of his poses, training bodybuilders, and the supplements from the supplement manufacturer.
In the notice of deficiency, respondent disallowed deductions of expenses for supplements. Included in the disallowed deductions labeled as “Supplements” were the costs of bison (buffalo) meat, which petitioner consumed daily, year-round, at the rate of 3 pounds per day.
In addition, petitioner also consumed enormous quantities of vitamins and minerals through various types of “shakes” containing ingredients to enhance strength and muscle development. Petitioner also used a variety of other products that were not ingested but were simply sprayed on or massaged into the skin to enhance his appearance. One of these products was called ProTan Muscle Juice Professional Posing Oil and, according to instructions, was applied “prior to pumping up backstage for optimum effects.”
Another similar product called Blow Out was applied to the body 5 minutes before a workout. Still another product was massaged over the body several hours before a posing to provide a suntan brown color or a deep tan to the body. Most of these products could not be purchased in local health food stores but were purchased solely through advertisements in bodybuilding publications. Respondent, in the notice of deficiency, disallowed the deductions claimed for the described items on the ground that, under section 262 of the IRC, these expenses were personal because the products described could be consumed by bodybuilders and nonbodybuilders as well.
What did the court say about all this?