One tax issue that can be a big one for businesses are deductions. There are a wide range of different deductions that tax law allows businesses to claim. Deduction matters can have a big impact on what a business' overall tax liability is.
The rules on business deductions are very complex. This is among the things that can contribute to deduction disputes sometimes arising between businesses and the Internal Revenue Service. Businesses of all different types can end up in such disputes. As a recent tax case shows, even sports teams can.
The case involves the Boston Bruins, the NHL team.
Earlier this year, the IRS issued a big tax bill to the team. It was an $85,028 bill and it was assessed in relation to the team's 2009-2010 taxes.
According to the team, the bill derives from a disagreement between it and the IRS over how big of a deduction the team was allowed to claim in its 2009-2010 taxes in relation to the costs of mandatory pregame team meals the team provides for its players prior to away games.
The team claimed 100 percent of such costs as a meal-related business deduction. However, generally, the IRS caps meal-related deductions at 50 percent of expenses.
The Bruins' owner has brought legal action challenging the tax bill and arguing that the team's claiming of a 100 percent deduction in relation to the above-mentioned meals was a valid business deduction. The owner argues that the meal expenses are an essential and necessary business expense for the team, as the pregame meals assist players in mentally and physically preparing for away games. According to the owner, this makes a 100 percent deduction for such meals appropriate.
Among the things that could be central issues in this case are whether the meals are in fact a necessary and ordinary business expenditure for the team and what the team's "business premises" are defined to be. It will be interesting to see if this case ultimately has implications for other sports teams and other businesses when it comes to meal-related deductions.
Whether a business is big, like a major sports team, or small, a lot can be at stake for it when it is in a dispute with the IRS over business deductions. Tax attorneys can help businesses here in California that have found themselves in a disagreement with the IRS over deductions.