Have you wondered what it takes to deduct the costs of sponsoring a sports team? What if you play on the team? Could you pay for the team travel expenses?
Revenue Ruling 70-393 states that the monies spent to outfit and support a sports team are similar to monies spent on other methods of advertising; accordingly, you may deduct them as business expenses for federal income tax purposes.
In the Strong case, Strong Construction Co. Inc. advertised its business primarily through either word of mouth or athletic sponsorships. As part of the athletic sponsorships, the corporation paid for the uniforms, logo design, hats, T-shirts, sweatpants, coats, bags, and pants for all players on its sponsored teams (broomball, softball, wrestling, etc.).
The court ruled that the expenses were ordinary and necessary business expenses and that Strong could deduct them as advertising or promotion.
In the Bower case, James Bower sponsored the Lafayette Bower Housing Hustlers basketball team, and he was both an assistant coach and a player.
As the Hustlers’ sponsor, Bower paid for the team’s travel, lodging, food, promotions, AAU fees, tournament fees, gym rental, and uniforms. The court noted that Bower’s sponsorship increased his commodity brokerage commissions and generated additional clients; accordingly, the court ruled that Bower’s sponsorship expenses were deductible business expenses.
If you are thinking of sponsoring a sports team and would like to discuss the sponsorship tax implications, please do not hesitate to reach out to your team at Luster Tax Consulting to work through this with you. Please use the following link to book your complimentary strategy call with your team at Luster Tax Consulting.