Monday, August 28, 2017

Boston Bruins Get to Deduct 100% of Meal Costs

As we all know business meals are generally deductible at only 50% except those related to the transportation industry.  There are some situations where business meals are deductible at 100%. This is one of those 100% situations.

Through various tax entity conduits Jeremy & Margaret Jacobs own the Boston Bruins, a professional hockey team based in Boston, Massachusetts.  The team plays half of their games in the arena in Boston area and the other half of their games at away arenas throughout the United States.

The team contracts with these away city hotels to provide lodging accommodations and banquet or conference rooms.  The Bruins request the rooms not be disclosed to the public and the contract also restricts access to the rooms to team employees and hotel staff.  The rooms are used for meetings as well as pregame meals and snacks.  The team then makes arrangements (i.e., caters) the pregame meals and snacks which will be available in these rooms.  Each catering company (normally the hotel) prepares meals and snacks for the team based on specific dietary as provided by the team.  The morning meal is mandatory for the players.  If they do not attend the meal or are late, they can be fined by the team and/or scratched from participating in games.  Players will meet during these meals with coaches one-on-one or in small groups to discuss strategy and review game film.

The team’s athletic trainers use hotel space, such as meeting rooms, players’ rooms, fitness center, pool, and hot tubs, for team activities such as medical treatment, massages, strength and conditioning training.

The deduction for meals is typically limited to 50%.  One of the exceptions from the 50% reduction, permitting a 100% deductibility, is for meals that fall into de minimis under Section 132 which states, in part, 1) the eating facility is owned or leased by the employer, 2) the facility is operated by the employer, 3) the facility is located on or near the employer’s business premises, 4) the meals are furnished by the employer during, or immediately before or after, the employee’s workday, and 5) the annual revenue from the facility normally equals or exceeds the direct operating costs of the facility.

IRS argued the meal costs did not meet the de minimis provision since the meals were not furnished near the Bruins’ home facility.  IRS adjusted the meal expense by reducing it by the 50% normal reduction.

Tax Court ruled in favor of the Bruins.  The Court stated the Code does not define a “lease” and the arrangement the Bruins had with the various hotels was in essence leasing a room for a short period of time.  Further the Bruins separately arranged for the meals, normally using the hotel catering. Therefore the meals were provided on the employer’s premises and provide by the employer.

Jeremy M.  & Margaret J Jacobs, 148 TC No. 24.  This case can be found by going to, clicking on Opinion Search and entering Jacobs in the Case Name box.

This text has been shared with you courtesy of:  David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).

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