Attorney-at-Law

EASY RIDER

In Uncategorized on 11/21/2014 at 22:15

No, not the Peter Fonda – Dennis Hopper 1969 tale, but the story of Ben Evans, a youth with what Judge Vasquez calls the natural talent and drive to race motorcycles at a professional level.

Young Ben lived in Boise, ID, a mecca for motocross, “a motorsport in which competitors race motorcycles at high speeds on dirt courses containing jumps and obstacles.” 2104 T. C. Memo. 237, filed 11/20/14, at p. 6.

In fact, so adept was Young Ben that in one year he “won the Amateur Motocross National Championship 458 Pro Sport class at the Loretta Lynn Motocross Ranch (Loretta Lynn) in Nashville, Tennessee. The Loretta Lynn title is the premiere title in the national amateur racing circuit. Every year 25,000 entrants compete to qualify to race at Loretta Lynn, but only 40 actually make it to the championship.” 2104 T. C. Memo. 237, at p. 4.

Just to make it clear that Loretta Lynn is the coal miner’s daughter and not an apparently failed nominee for Attorney General, Judge Vasquez footnotes: “The event is named after the country singer of the same name.” 2014 T. C. Memo. 237, at p. 4, footnote 4.

Anyway, Young Ben is ticketed for stardom, but Tax Court is concerned with Mom and Dad, William D. Evans and Caroline F. Evans. Mom and Dad’s personal tax return notes Dad’s income from his construction company, licensed in Idaho and doing business nowhere else.

And arriving at that income, Dad deducts money he spent on a motorhome to haul Young Ben and his motorcycles, which actually were carried in the motorhome, thus taking the motorhome out of the Section 179(d)(1) trap that knocks out lodging type property from the quick-kick deduction in Section 179.

Ben loses some deductions for a utility trailer for want of evidence, and he did put income and expenses on the wrong lines of his return, but as his trusty CPAs were qualified and had all the info, no penalty for Dad.

Finally, even though Young Ben’s racing took place afar from Boise, ID, there was some benefit to Dad’s construction business. There’s caselaw that supports racing as a promotional endeavor for construction firms. And even pizza purveyors.

But since Dad can’t show what was the industry standard for racing expenses, or what was the exact benefit his construction company got from Young Ben’s easy riding, Judge Vasquez gives Dad a Cohan approximation.

And while agreeing with IRS that just because the expenses Dad deducted were a small fraction of Dad’s gross receipts doesn’t make the expenses reasonable, Judge Vasquez allows that the Cohan rule covers this case.

So the lesson for the offspring of construction company moguls is “get on your bike.”

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