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Boston Bruins Face off Against IRS Over Taxes on Team Meals

Taking a client out for dinner or grabbing a meal while on a business trip is one thing. Feeding an entire team of ravenous hockey players is quite another.

The IRS treats both the same way when it comes to tax deductions, and now the Boston Bruins owner is pushing back. The team is suing the federal government's tax agency for the right to deduct the full amount of team meals while on the road.

A Big Piece of the Pie

This all started when the Bruins got a bill from the IRS in April, claiming the team owes a total of $85,028 in unpaid taxes from 2009 and 2010. The Bruins appealed the amount in July, saying the discrepancy was due to how much the team was deducting for team meals during road trips.

The IRS limits deductions for meal expenses for "entertainment, amusement, or recreation" to 50 percent in most cases. However, the Bruins were taking 100 percent tax deductions on road meals, contending preparing the team for competition is an ordinary and necessary business expense. Their argument, and the ultimate ruling, could have an enormous impact for sports franchises.

Fundamental Feedings

In arguing that the road meals are a fundamental part of their business, the Bruins describe the meals as essential:

"In short, the pregame mandatory meals and the meetings at away city hotels allow the club and the players to prepare for the upcoming game -- both physically and mentally ... In this regard, the pregame meals and the meetings serve as a necessary component of the Bruins' hockey operations."

There could also be a few more factors that lend themselves to treating these meals like food and beverages supplied at the office:

  • When on the road, the team uses a local hotel as its "base of operations."
  • The hotel is essentially it's business premises, where players "watch film, receive medical treatment, and eat there before morning practices and again before evening games."
  • The team controls meal options provided by hotel catering services: "the team dictates exactly what proteins, fruits, and vegetables must be available."

We'll keep an eye on this as it moves forward -- $40k a year in taxes in a sizeable amount for a sports franchise, and if you multiply that amount by all the professional teams in the country, that could mean a lot of lost revenue for the IRS.

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