The Boston Bruins hockey team provided meals (and lodging) for all team members and the support staff for games they played out-of-town.
IRS audited the income tax returns and disallowed the deduction for meals. The Bruins went to Tax Court claiming the meals were qualified business expenses.
The Bruins contracted with out of town hotels to provide sleeping accommodations and meal rooms where pregame meals and snacks are served. For every breakfast and lunch, all traveling hockey employees (not just the players) were required to be present. The players met with coaches and the public relations staff also attended to meet with players concerning media inquiries, interviews and other public issues.
The Tax Court found the Bruins did meet the de minimis fringe benefits rules and allowed the full deduction. The Court found the Bruins were not subject to the 50% limitation on the meals deduction since the various tests were met.
The nondiscrimination test was met because all traveling hockey employees were covered with meals and lodging provided. The meals met the nondiscriminatory requirements of Sec. 132(e)(2).
The eating facility was found to be “owned or leased by the employer” since the contracts with the hotels gave a right to use and occupy to conduct team business. The agreements were basically leases so Regulation 1.132-7(a)(2)(i) was met.
The Court found the eating facility was operated by the employer (the contracts with the hotels) met the requirement of the Regulations.
The business premises requirement the employee meals were at an employer-operated eating facility since the facility was a place where employees perform significant duties at the hotels. The employees were found to be on the employer’s premises (leased areas in the hotels).
IRS argued the activities at the hotels were less important than playing the games so the meals were not fully deductible. The Tax Court found IRS was wrong and the deductions were OK as claimed. IRS finally acquiesced and agreed the taxpayer was correct.
So, IRS is not always right. Why IRS even went to Tax Court on the issue is not clear.
Did you hear “If the world is cold, make it your business to build fires.” Horace Traubel
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