Federal Income Taxation
Moss v. Commissioner, 758 F.2d 211 (7th Cir. 1985)
Study notes for Moss v. Commissioner: professor notes, cold call prep, exam angles, and memory aids.
Expenses incurred during regular working lunches for a law firm are nondeductible personal expenses and not deductible under §162.
In Moss v. Commissioner, the Seventh Circuit addressed the deductibility of expenses incurred during business meetings at restaurants. The case highlighted the distinction between 'ordinary and necessary' business expenses under IRC §162 and personal expenses under IRC §262. The court ultimately held that the law firm's regular working lunches, while integral to the operation of the firm, did not qualify for deduction due to their inherent nature as personal meals taken during the ordinary flow of work. The case serves as a crucial reminder for tax practitioners regarding the nuances of what constitutes a deductible business expense.
Additionally, this case emphasizes the need to differentiate between business and personal expenses. The court rejected the notion that the presence of business discussions during meals could render the expenses deductible, thus reinforcing the premise that personal pleasure derived from meals cannot be overlooked when considering the business nature of the expense. This situation invites students to analyze what constitutes a reasonable expectation of deductibility in the context of shared meals among business partners.
Business meals aren't deductible unless strictly for business—Moss shows the line.
| Case | Distinction |
|---|---|
| Cohen v. Commissioner | Cohen involved a one-time client meeting at a restaurant where a clear business purpose was established, allowing for partial deduction. |
| Coral Gables Constr. Co. v. Commissioner | This case allowed for deductions related to meals primarily aimed at business development, contrasting with the routine nature of meals in Moss. |
Restricting deductions for meals safeguards the tax system from excessive claims for personal expenses masquerading as business necessities.
Limiting deductions for legitimate business meetings may discourage partnerships and networking in a professional context.
In exams, expect questions that ask you to analyze the deductibility of expenses based on the distinctions between personal and business usage, particularly with respect to meals and entertainment.