CPA David Kelly argued that the cost of his exercise equipment was a business expense because he needed it in order to maintain stamina for his work. Basic-ally, he argued that the equipment passed the “but for” test – i.e., that but for his ability to exercise (with the equipment), he wouldn’t have been able to earn all of that lovely income that the IRS so enjoyed taxing him on. Based on the textbook discussion and the Tax Court’s analysis, state and briefly explain why you, as a CPA yourself, would or wouldn’t have been comfortable representing David against the IRS and arguing that he should be allowed either a full or at least partial deduction for the cost of his equipment.
CPA David Kelly argued that the cost of his exercise equipment was a business expense because he needed it in order to maintain stamina for his work. Basic-ally, he argued that the equipment passed the “but for” test – i.e., that but for his ability to exercise (with the equipment), he wouldn’t have been able to earn all of that lovely income that the IRS so enjoyed taxing him on.
Based on the textbook discussion and the Tax Court’s analysis, state and briefly explain why you, as a CPA yourself, would or wouldn’t have been comfortable representing David against the IRS and arguing that he should be allowed either a full or at least partial deduction for the cost of his equipment.
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