Pregame away day meals were fully deductible de minimis fringe benefit

A professional hockey team, organized as an S corporation, was entitled to deduct the entire cost of pregame meals for players and personnel at away games, the U.S. Tax Court has ruled. The meals qualified as de minimis fringe benefits.

Although the contracts between the team and the hotels were not titled “leases,” the team paid consideration “to use and occupy” the hotel rooms where the meals were served. While the team did not pay separate consideration for the rental of the meal rooms, those rooms were essential to the team’s away game operations; in addition to meals, the team used the rooms to conduct team business. Further, the facility was operated by the team because the team contracted with the hotels to operate eating facilities for its employees.

The pregame meals were mandatory and the players used the time to meet with coaches and review game film and with public relations staff to prepare for interviews. In addition, the coaches, trainers and management used meal time to meet among themselves and make roster adjustments. The evidence also established that the team could not perform all of these activities at the opponent’s arena because of limited access and insufficient space and facilities. Moreover, without the preparatory activities that occurred at the hotels the team’s performance during games would likely be adversely affected. Thus, the hotels were vital to the team’s business objective (winning hockey games) and were where a significant portion of the traveling employees’ responsibilities and team business were conducted.

Finally, the pregame meals were provided to the traveling employees for substantial noncompensatory business reasons, including for nutritional and performance reasons, and were provided before, during or after the employees’ workday. Therefore, the meals qualified as de minimis fringe benefits and were not subject to the 50-percent limit on business meals.

SOURCE: Jacobs and Jacobs v. Commissioner (US Tax Court), No. 19009-15, 148 TC, June 26, 2017.
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