For the taxable years 2009 and 2010, the IRS sent Boston Bruins owner Jeremy Jacobs tax deficiency notices of $45,205 and $39,823, respectively. Now, that’s a pretty big bill for an everyday taxpayer, but for a man with an estimated net worth of over $4 billion, it’s not a huge deal. Although, that doesn’t mean he won’t fight it.
So what triggered the deficiency notices? The IRS claimed that the Bruins were only eligible to deduct 50% of meals provided players during out-of-town games. Back in the good ole days of the 1980s, business owners frequently ran up large tabs for boozy business lunches at expensive restaurants because it was 100% deductible.
Then, along the way Congress enacted Section 274(n) of the code, which generally limits meal deductions to 50%. However, there is a de minimis exception in Section 119(a). Of course, like all exceptions, there are certain requirements, one of which is that the meals must be provided on the “business premises,” which is the crux of this case.
The IRS argued that during these out of town games, meals were not served on Bruins property and the exception shouldn’t count. However, the Bruins claimed that these meals served in rooms leased by the business were a vital part of the franchise’s success and should qualify for the exception.
On June 26, 2017, the Tax Court ruled in favor of the Bruins owner and opened up the potential for greater latitude with the business meals deductions in the future.