In Uncategorized on 01/10/2022 at 16:40

In a busy blogger’s day, one spends almost as much time deciding whether to blog a case as one spends actually blogging it. Lafayette Lorenzo Nelson, III, Docket No. 892-19, filed 1/10/21 is one such. Plus side, Judge David Gustafson. Minus side, another Section 274 indocumentado with tax home obbligato, as fact-specific as it gets. Plus side, LLN3’s work as product manager for Egyptian Magic Skin Cream, an outfit his uncle founded, with side-hustle in the music biz. And the decider, an interesting wrinkle on hotel travel deductions.

“Swagg Money is a record label responsible for signing artists, recording, and marketing their music, booking their concerts, and planning logistics for their tours. Mr. Nelson tries to identify promising new artists, invest in them, build their success, and profit from them in the long term.  Although Swagg Money maintained a Texas business address, its principal place of business was Atlanta, Georgia.” Transcript, at p. 6.

LLN3 has deductions from both. He shuttles from DC (corporate HQ for the Egyptians) to Dallas (bottling and distribution center). He lives in MD, commutable to DC. And travels all over on the music bit.

He gets some travel deductions from the Swagg gig, even though it loses money, because IRS folds on hobby loss. LLN3’s check register and credit card slips are enough. Likewise, LLN3 is in DC much more than in Big D, so that’s his tax home; thus trips to Dallas can be written off as uncompensated employee business deductions (now extinct).

The interesting part: “Given that Mr. Nelson’s tax home in [year at issue] was Washington, D.C., it follows that he was ‘away from home in the pursuit of a trade or business’ while in Dallas, and that he should therefore be allowed deductions for air travel between Dallas and Washington, D.C., as well as for the cost of his lodging and car rentals while in Dallas. See sec. 162(a)(2). Mr. Nelson had a business purpose to reserve his hotel room in Dallas for an extended period, because of the indeterminate yet frequent nature of his travel to Dallas for his work with Egyptian Magic, and because of the preferential nightly rate that the hotel offered for extended rentals.” Transcript, at p. 18.

While this is a non-precedential off-the-bencher, the argument that a cheaper extended stay rate might obviate the need to prove what nights you slept where could be useful for business travel by unreimbursed non-employees.


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