Deduct Your Costs of Sponsoring Sports Teams

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.

TCJA Allows Bonus Depreciation on Purchase of Leased Vehicle

Before the Tax Cuts and Jobs Act (TCJA), your purchase of the vehicle you were leasing did not qualify for either Section 179 expensing or bonus depreciation. But times have changed.

The TCJA made two changes that mean 100 percent bonus depreciation is available on the vehicle you lease and then purchase, regardless of whether you purchase it during the lease term or at the end of the lease. The two technical reasons you can do this are as follows:

1.      During the lease, you had no depreciable interest.

2.      Bonus depreciation is now available on used property.

Technically, the two changes work like this:

·         While you were leasing the vehicle, you had no depreciable interest in the vehicle. The lessor depreciated the vehicle. You, the lessee, paid rent.

·         Your purchase of the vehicle that you were leasing is the purchase of a vehicle that you had NOT used under the bonus depreciation law, because you did not have a depreciable interest in it at any time.

Example. You pay $32,000 for a pickup truck that you have been leasing for business purposes. The pickup truck has a gross vehicle weight rating of 6,531 pounds, and your mileage log proves 90 percent business use. You may use bonus depreciation to deduct the $28,800 business cost of the pickup ($32,000 x 90 percent).

Note the difference: As with prior law, with Section 179 expensing, you get no additional deductions. But with bonus depreciation, you can expense your entire business cost.

Backdoor Roth IRA After TCJA

Good news. The Tax Cuts and Jobs Act (TCJA) did not harm the backdoor Roth strategy.

As you likely know, the Roth IRA is a terrific way to grow your wealth with a minimum tax downside because you pay the taxes up front and then, with the proper holding period, pay no taxes after that.

But if you earn too much, you’re completely barred from contributing to a Roth IRA unless you can use the backdoor Roth technique, which involves making a nondeductible contribution to a traditional IRA and then rolling that money into a Roth.

The backdoor Roth strategy has been around for a good nine years, and it has experienced no trouble that we are aware of, so we think it’s a good strategy. We also like the recent notations in the legislative history and the comments from the IRS spokesperson that show approval of the strategy.

Keep in mind that with some planning, you can avoid any taxes on the rollover. For example, if you have an existing traditional IRA, you can move those monies to your qualified plan to avoid having the backdoor strategy trigger some taxes. And if you have no traditional IRA, the nondeductible contribution to the traditional IRA and the subsequent rollover to the Roth IRA triggers no taxes.

Selling Your Home

Here are some things that homeowners should think about when selling a home:

Gains
Taxpayers who sell their main home and have a gain from the sale may be able to exclude up to $250,000 of that gain from their income. Taxpayers who file a joint return with their spouse may be able to exclude up to $500,000. 
Homeowners excluding all the gain do not need to report the sale on their tax return.
Ownership and use
To claim the exclusion, the taxpayer must meet ownership and use tests. During a five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.
Losses
Some taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
Multiple homes
Taxpayers who own more than one home can only exclude the gain on the sale of their main home. They must pay taxes on the gain from selling any other home.
Reported sale
Taxpayers who don’t qualify to exclude all of the taxable gain from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return.  Taxpayers who receive Form 1099-S must report the sale on their tax return even if they have no taxable gain.
Mortgage debt
Generally, taxpayers must report forgiven or canceled debt as income on their tax return. This includes people who had a mortgage workout, foreclosure, or other canceled mortgage debt on their home. Taxpayers who had debt discharged after Dec. 31, 2017, can’t exclude it from income as qualified principal residence indebtedness unless a written agreement for the debt forgiveness was in place before January 1, 2018.
Possible exceptions
There are exceptions to these rules for some individuals, including persons with a disability, certain members of the military, intelligence community and Peace Corps workers.