Business Expense Laws: Case Study
Orange, Ca. He and his wife Susan used their Lear Jet which they had purchased
for 2Million, to travel to their timber farm in Oregon (10 trips) to their
Tahiti property (2 trips) to computer symposia (5 trips) and to Park City Utah
(8 trips). The timber farm is operated in business like fashion. Amos ans Susan
nearly 2Million remodeling the Tahiti house and related property they travel to
Tahiti twice a year stay there for several weeks each time. They travel to Park
city to go skiing. The annual cost of operating the Lear jet including
deprecation is $700,000.
On their tax return Amos and Susan deducted $700,000 as a
business expenses under section162. An IRS agent countered that this expense
was not ordinary and necessary or that it was a personal expense. Therefore,
she disallowed the deduction. Evaluate the position taken by Amos and Susan and
suggest your advice for their meeting with the IRS.
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