Section of Taxation Publications
  VOL. 56
NO. 4
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 Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Gone Fishing! A Fishing Trip Following A Sales Meeting Is Not Tax Deductible Under Section 162: Townsend Industries v. United States
Todd A. Walter


In Townsend Industries v. United States, a federal district court held that a company’s expenditures for employee fishing trips were subject to employment tax. To reach such a result, the court found it necessary to consider if the costs of the fishing trips were employee fringe benefits excludible from the employees’ gross income under section 132 instead of additional wages. In turn, this required the court to consider whether the fishing trip costs were deductible business expenses under sections 162 and 274. In each instance, the court concluded they were not, and the taxpayer was liable for the wages tax deficiencies assessed by the Service. This case provides an opportunity to explore the tax treatment of company outings. Although the issue before the court was employment tax, the court’s analysis depended on a consideration of the relationship among sections 132, 162, and 274.

Accordingly, Part I of this Note presents the factual background of the case. Part II discusses the taxpayer’s arguments and the trial court’s response. Part III analyzes the decision of the court. Part IV considers the key implications of the case for trip planning purposes and discusses alternative methods the taxpayer could have implemented to ensure the deductibility of the trip’s cost. [Editors’ note: The Eighth Circuit reversed the district court in this case as The Tax Lawyer was going to press. Townsend Industries, Inc. v. United States, 2003 U.S. App. LEXIS 19055 (2003).]


Published by
Section of Taxation, American Bar Association
With the Assistance of
Georgetown University Law Center


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