{"id":9317,"date":"2015-10-18T20:40:43","date_gmt":"2015-10-19T00:40:43","guid":{"rendered":"http:\/\/www.thevalleyledger.com\/?p=9317"},"modified":"2015-10-18T20:47:33","modified_gmt":"2015-10-19T00:47:33","slug":"painter-brushes-off-the-irs-in-tax-court-bryantukartslaw","status":"publish","type":"post","link":"https:\/\/www.thevalleyledger.com\/?p=9317","title":{"rendered":"Painter Brushes Off the IRS in Tax Court @BryanTukArtsLaw"},"content":{"rendered":"
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\u00a0<\/b><\/span><\/p>\n

Over the last couple of years I have written and talked a lot about labels \u2013 what they mean, who imposes them on us, and what labels one uses to describe oneself. \u00a0Are you an artist or musician just because you call yourself one? \u00a0What steps do you need to take in order to earn that title or label? \u00a0What kind of work must you produce to justify calling yourself an artist?<\/p>\n

That very issue came up in the legal news this weekend, \u00a0in the matter of\u00a0<\/span>Susan Crile v. The Commission of Internal Revenue<\/em><\/a>. \u00a0<\/span>While the\u00a0Crile<\/em>\u00a0case\u00a0was a federal tax dispute between a taxpayer and the IRS, here is what the US Tax Court was asked to consider: \u00a0If a taxpayer says she is\u00a0an artist, but doesn\u2019t make \u00a0her primary living from selling artwork, can that taxpayer\u2019s work as an artist be considered his or her profession for tax purposes?<\/p>\n

Before we go any further, you may be wondering just what is the Tax Court, anyway?<\/p>\n

The\u00a0US Tax Court<\/a>\u00a0<\/span>is a federal court that has jurisdiction over disputes between taxpayers and the IRS when the IRS determines that the taxpayer has underpaid his or her taxes. \u00a0\u00a0So in other words, if the IRS has determined that you haven\u2019t paid all the tax that you owe, you can take the IRS to court over the issue.<\/p>\n

In the\u00a0Crile<\/em>\u00a0case, the taxpayer appealed a decision of the IRS that she couldn\u2019t deduct art-related deductions as business deductions. \u00a0 If the IRS was correct, Crile would have underpaid her taxes by tens of thousands of dollars. \u00a0The IRS\u2019s main argument was that the art related expenses were not proper business deductions because Crile was also employed by Hunter College as a professor, and that painting constituted a hobby, not a profession. \u00a0The significance of this is that under Section 162 of the Internal Revenue Code, a taxpayer can deduct from income those expenses which are\u00a0\u201cordinary and necessary expenses\u201d incurred in the carrying on of the taxpayer\u2019s\u00a0business.<\/p>\n

Herein lies a common fact pattern for those engaged in their pursuit of the arts: earning a living at a \u201cday job\u201d while pursuing their passion \u2013 painting in Susan Crile\u2019s case \u2013 which does not generate enough cash to pay the bills.<\/p>\n

Judge Lauber, the Tax Court judge who decided the case, to his credit understood that painting was indeed part of Crile\u2019s profession\u00a0and ruled that the deductions were proper.<\/p>\n

In his written opinion, Judge Lauber noted that:\u00a0\u201c[Crile\u2019s]\u00a0artwork hangs in the permanent collections of at least 25 museums. These include the Metropolitan Museum of Art, the Guggenheim Museum, the Brooklyn Museum of Art, the Phillips Collection, the Hirshhorn Museum, and art museums at eight colleges and universities. Museums have a rigorous vetting process for acquiring art. Museum acquisitions boost an artist\u2019s reputation in the eyes of collectors and may contribute to price increases for the artist\u2019s other works.\u201d<\/em><\/p>\n

For more detail, you can read Judge Lauber\u2019s entire opinion here<\/a>.<\/p>\n

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Bryan’s legal practice is focused on\u00a0<\/span>business & banking law<\/a>,\u00a0nonprofit organizations<\/a>,\u00a0family law<\/a>,\u00a0arts & entertainment law<\/a>,\u00a0and\u00a0arts organization consulting<\/a>. \u00a0He was a TEDx speaker in 2014 on how creative minded people can thrive in the business world and received an Arts Ovation Award from the Allentown Arts Commission in 2015. To contact Bryan about a legal matter, or book Bryan for a speaking or consulting engagement, email him at\u00a0bryan@tuklaw.com<\/span><\/a>.<\/em><\/div>\n<\/div>\n
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\u00a0Be sure to check out these other articles by Bryan Tuk<\/strong><\/div>\n
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