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Treas. Reg. § 1.262-1 provides: Personal, living and family expenses. (b)(5) Except as permitted under I.R.C. §§ 162, 212, or 217, the costs of the taxpayer's meals not incurred in traveling away from home are personal expenses.
The seven attorneys in the partner's law firm met every business day for lunch at a cafe close to the courthouse and discussed current litigation problems, scheduling, assignments, and settlement of cases. The firm paid for the meals of those lawyers who ate during the firm meetings. The respondent Commissioner of Internal Revenue found deficiency in the partner's federal income tax and determined that he was not entitled to deduct his share of the partnership's expenses representing daily business luncheon meetings. The partner claimed that the luncheon meeting expenses were deductible under I.R.C. § 162 as ordinary and necessary business expenses, and in the alternative, claimed that they were deductible as outlays for education pursuant to Treas. Regs. § 1.162-5.
Were the luncheon meeting expenses deductible under I.R.C. § 162 as ordinary and necessary business expenses?
The court agreed with the commissioner's view that the lunches were personal and, therefore, a nondeductible expense. The court found that although the meetings may have been ordinary and necessary to the business, the outlay was for meals, a personal item. The court reasoned that the mere fact that the lawyers' time was given over the noon hour did not convert the cost of daily meals into a business expense to be shared by the government. The court also found that although the lunches may have been educational to the younger and older attorneys alike, combining nourishment with enlightenment did not make the nourishment deductible.