Business Deduction for Personal Living Expenses: A Uniform Approach to an Unsolved Problem
![handle is hein.journals/pnlr122 and id is 875 raw text is: BUSINESS DEDUCTION FOR PERSONAL
LIVING EXPENSES: A UNIFORM
APPROACH TO AN UNSOLVED
PROBLEM
DANIEL I. HALPERINt
I. INTRODUCTION
All of us eat, wear clothes and occupy houses or apartments.
Many of us travel, seek entertainment at country clubs, night
clubs or sporting events and try to improve ourselves through
education. The norm is to pay for these items out of after-tax
income. A lucky few, however, get an affirmative answer to the
popular question, Is it deductible? and pay taxes only on
income left over after satisfying their needs or desires for one of
more of these items. This is a major advantage for an individual
in a high tax bracket. For example, if a consumption expendi-
ture is deductible, a taxpayer in the 50 percent bracket can
double his pleasure at the same out-of-pocket cost. Even if he
would rather not increase his use of the deductible item, there is
still a significant benefit.'
A. The Problem
The difficulty arises because
an individual is ... regarded for tax purposes as having
two personalities: one is a seeker after profit who can
deduct the expenses incurred in that search; the other is
a creature satisfying his needs as a human and those of
his family but who cannot deduct such consumption
and related expenditures.2
t Associate Professor of Law, University of Pennsylvania. B.B.A. 1957, City College
of New York; J.D. 1961, Harvard University. Member, New York Bar.
I For example, assume an individual decades he can afford to spend for entertain-
ment the amount left after the tax collector takes his share of $10,000 of income. If the
tax bite is 50%, there is $5000 left for such activity, yet when entertainment is deductible,
the entire $10,000 can be spent for this purpose. If instead the entertainment expendi-
ture were kept constant at $5000, there would be $2500 left from the $10,000 originally
set aside for entertainment for other purposes. That is:
Taxable income before entertainment $10,000
Entertainment deductible -5,000
Taxable income 5,000
Tax at 50% -2,500
Excess available $ 2,500
' I S. SURREY, W. WARREN, P. McDANIEL & H. AULT, FEDERAL INCOME TAXATION,
CASES AND MATERIALS 496 (1972) [hereinafter cited as SURREY].](ViewImageLocal?handle=hein.journals/pnlr122&div=47&collection=&method=preview&ext=.png&size=3)
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Business Deduction for Personal Living Expenses: A Uniform Approach to an Unsolved Problem
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