The Louis Vuitton dilemma Nikki Sloan is a sales representative for a high-end real estate company, with
Question:
The Louis Vuitton dilemma Nikki Sloan is a sales representative for a high-end real estate company, with focus on industrial leasing at the Dallas-Fort Worth metropolitan area. Three years after she was hired, she was awarded a recognition as the Top-10 Industrial Brokers of the year. Her client database ranges from companies in the health industry, and large manufacturing, airspace, software and engineering fields. A regular day at work for her frequently involves breakfast with the company’s managing team at luxurious restaurants and country-club lunch meetings with clients, followed by work-related soiree evenings. At the time Nikki was hired in 2018, she concluded that in order to achieve successful sales results she had to look the part, although her personal lifestyle is not lavish and she currently shares an economic-lease apartment with two friends to keep her living costs low, as she is currently paying for previous loans taken before she started her new job. Hence, she used a credit line to purchase expensive clothes and accessories and took-on a new loan to purchase an electric sports car. She is convinced that these items have helped her successful career. Acquiring these expensive items has left Nikki with a high credit balance, and she wants to evaluate all the options she has in order to maintain a professional and elegant profile that connects with the luxurious style from her clients. After a recommendation from one of her tax friends, Nikki wants to claim a Louis Vuitton bag purchase on her 2022 tax return as a deductible expense and reduce her taxable income. She comes to you, the tax partner of an accounting firm in Dallas. She explains that she is not knowledgeable on tax matters and asks if the purchase of this $3,100 bag, which she plans to use for carrying her small laptop and other work tools to her client meetings, can be used as a deduction to her taxable income (in any form).
Provide an analysis following the research method (facts, issue, authority, and conclusion) for these two scenarios:
a) Nikki is a full-time employee at the real estate company and does not have any other form of income.
b) Nikki is considering opening a sole-proprietorship (and file a Schedule –C with her tax return) where she can be an independent real estate agent.
Court case Donnelly v Comm 1959
Using the resolution of the court case you read, use the court case as a reference and answer the two scenarios in The LV dilemma. Add any Internal Revenue Code sections, regulations, or other primary authorities to your explanation.(court case Donnelly v Comm 1959)
Follow this format:
Briefly state the facts.
Briefly state what issues (deductibility) arise from the facts.
Using the court case and other primary authorities, explain the resolution that would proceed related to the issues you identified, for each scenario.