United States v. Correll

United States v. Correll was a landmark United States Supreme Court case that significantly impacted the tax treatment of business-related meal expenses in the United States. The case, decided on November 20, 1967, established the "ordinary and necessary" standard for the deductibility of such expenses under Section 162(a) of the Internal Revenue Code.

Background

The case involved a taxpayer, Correll, who sought to deduct the cost of meals consumed while away from home on business. The Internal Revenue Service (IRS) denied these deductions, arguing that the expenses were not "ordinary and necessary" business expenses as required by Section 162(a) of the Internal Revenue Code. The dispute centered on whether the cost of meals during business travel could be considered an ordinary and necessary expense, thus deductible for tax purposes.

Opinion of the Court

The Supreme Court, in a unanimous decision, held that meal expenses incurred during business travel are indeed deductible, provided they meet the "ordinary and necessary" criteria set forth in Section 162(a). The Court reasoned that such expenses are common in the business world and necessary for conducting business away from home. This decision clarified the tax treatment of business meal expenses, allowing for their deduction under certain conditions.

Impact

The ruling in United States v. Correll had a profound impact on the tax practices of businesses and individuals alike. It established a clear guideline for when meal expenses could be considered deductible business expenses, thus influencing how businesses plan and report expenses related to business travel. The decision also influenced subsequent IRS regulations and guidance on the deductibility of meal and entertainment expenses.

Subsequent Developments

Following United States v. Correll, the IRS and Congress have made several changes to the tax code regarding the deductibility of meal and entertainment expenses. Notably, the Tax Cuts and Jobs Act of 2017 made significant changes to the deductibility of entertainment expenses, but the principles established in Correll regarding the deductibility of meal expenses largely remain in effect.

See Also

• Internal Revenue Code
• Tax Cuts and Jobs Act
• Business expenses
• United States Supreme Court cases