Denver, Colorado — A federal appeals court has made a ruling that will steer a personal injury attorney away from claiming car racing expenses as a deductible business marketing cost. On Monday, the 10th U.S. Circuit Court of Appeals in Denver decided against James William Avery, who sought to deduct over $300,000 spent on his high-speed hobby, according to Law360.
Avery, who relocated to Indiana from Colorado in 2003 but continued his legal practice in Colorado, sought to grow his client base in his new home state. To achieve this, he began participating in car shows in Indiana and eventually ventured into car racing. Avery argued that his racing activities, which included branding his Dodge Viper with his firm’s logo and linking his racing team’s webpage to his firm’s Facebook page, were meant to advertise his legal services.
Despite his efforts, both the U.S. Tax Court and the 10th Circuit found that Avery’s racing expenditures failed to qualify as ordinary and necessary business expenses deductible by attorneys. The courts pointed out that while Avery greatly relished the thrill of racing—a leap from his former hobby of collecting and showcasing cars—it was still deemed a personal pleasure.
In defending his case, Avery contended that his enjoyment of the activity should not influence the assessment of its validity as a marketing expense. He feared such judgment criteria could lead to misclassification of other enjoyable yet work-related expenses as personal.
However, the 10th Circuit noted that the Tax Court might not have weighed Avery’s enjoyment heavily in its decision. The appellate court mentioned that even if personal delight was considered, it was just one of the multiple factors involved in their analysis.
The decision signals a caution for professionals who might wish to intertwine personal hobbies with business promotional activities, highlighting the stringent nature of tax deductibility criteria.
This ruling leaves Avery, and possibly others considering similar tax deductions, at the finish line without the expected financial relief for promoting their businesses through unique and personally enjoyable means.
Avery has remained unavailable for comments, as attempts to reach him through email and a contact number provided in his appellate brief have not received responses.
This legal and financial racing saga has reached its conclusion in the case labeled Avery v. Commissioner of Internal Revenue, establishing a clear boundary on what constitutes a deductible business expense.
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