The judge said, "The cost of a big-game hunt in Africa doesn't sound like the deductible expense of a dairy business."
Maybe it isn't, but maybe it is. The key factor is what the dairy gets out of the adventure. Compare these two cases to see when hunting costs are deductible:
Hunting for the company: O. Carlyle Brock and his family owned Sanitary Farms Dairy in Erie, Pa. The dairy bought, processed and sold milk.
Its advertising and promotion revolved around wild animals. Brock, the company president, invited customers and prospective customers to the plant where he and his wife, Emily, served dinners of game shot in North America. During the dinners, Brock shared films of the hunt. The company displayed mounted heads and skins from hunts in their own museum for the public. School groups and clubs visited the museum, where the dairy promoted its products.
To further expand its theme, Brock and his wife, both experienced hunters, went on a six-month hunt in Africa. In addition to skins and heads, they brought back two leopards and a tiger for the Erie zoo. The company conducted a "name-the-tiger" contest through newspapers and showed films of the hunt in the museum.
But when the company tried to bag a deduction for the hunt, the IRS shot it down.
However, because the company had successfully promoted the dairy, the tax court allowed the deduction on appeal. The couple's departure, hunt's progress, hunters' return and contest were reported free by the newspapers as news, to the advantage of the dairy, which was recognized as the sponsor. The judge emphasized that this provided good advertising at a relatively low cost.
The IRS, understandably, was unhappy with the decision. It said it wouldn't appeal but warned it wouldn't concede in a similar case unless the facts are "substantially identical."
Hunting for fun: Robert and his wife, Kay Gow, of Norfolk, Va., owned most of the stock of an inactive corporation. It owned a one-third interest in a time-share resort.
Robert, a retired civil service worker, hunted at a 500,000-acre ranch in Texas offering more than 60 species of imported African wildlife. He also went to Alaska in search of exotic game such as moose, caribou and elk. He took Kay, a teacher and education supervisor, along to spend time with him.
He planned a museum for the resort and a traveling display of animal mounts, but those plans never materialized. Instead the mounts were displayed at the Texas ranch and in Norfolk at Bob's Gun & Tackle Shop.
Gow's inactive corporation paid and deducted the trophy collection costs of $572,373. When the IRS disallowed the deductions, the couple argued in court that this case was like Sanitary Farms. The judge said, no, it wasn't. In this case the hunting was primarily for Gow's enjoyment, while in Sanitary Farms the safari assisted in marketing the company product.
Conclusion: In general, an expense may be deducted if it is primarily associated with profit-motivated purposes and personal benefit is distinctly secondary.
The moral: Deductions of hunting expenses are fair game for the IRS.