Boston Bruins Owners' Seek Redetermination of Tax Deficiencies

 

a. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 1 (Schedule E -- Income/(Loss) -- Deeridge), that for the tax years ended December 31, 2007 through December 31, 2010, additional income from the flow-through entity Deeridge Farms Hockey Association should be reported on Petitioners' returns.

b. The Commissioner erred in determining at pp. 2 of 14 (Schedule 1), 3 of 14 (Schedule 2) and 4 of 14, Explanation of Items, enumerated paragraph 1 (Schedule E -- Income/(Loss) -- Deeridge), that for the tax years ended December 31, 2007 through December 31, 2010, Petitioners' taxable income should be increased based upon the additional income from the flow-through entity Deeridge

c. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 2 (Net Operating Loss Carryback from 2007), that Petitioners' net operating loss in the tax year ended December 31, 2007 should be decreased by $78,649.

d. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 2 (Net Operating Loss Carryback from 2007), that the carryback of the $78,649 net operating loss from Petitioners' tax year ended December 31, 2007 to Petitioners' taxable year ended December 31, 2005 should be disallowed.

e. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 2 (Net Operating Loss Carryback from 2007), that Exhibit 1 (including Exhibits 1a, 1b, and 1c) to the notice of deficiency accurately reflects the amount of net operating loss carryback from 2007 to which Petitioners are entitled.

f. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 2 (Net Operating Loss Carryback from 2007), that Petitioners' taxable income for the tax year ended December 31, 2005 should be increased by $78,649.

g. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 3 (Itemized Deductions), that certain of Petitioners' expenses deducted as miscellaneous itemized deductions are not deductible because they exceed a percentage of Petitioners' adjusted gross income.

h. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 3 (Itemized Deductions), that Petitioners' miscellaneous itemized deductions for the taxable years ended December 31, 2005 and December 31, 2007 should be adjusted by $1,573 and $1,513, respectively.

i. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 3 (Itemized Deductions), that the amount that Petitioners can claim for some of Petitioners' itemized deductions is limited because Petitioners' adjusted gross income (AGI) has exceeded the threshold amount.

j. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 3 (Itemized Deductions), that Petitioners' itemized deductions for the tax years ended December 31, 2005, December 31, 2007, and December 31, 2009 should be limited to $4,636,852, $1,923,208, and $1,317,763, respectively.

k. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 3 (Itemized Deductions), that Exhibit 2 (including Exhibits 2a, 2b, and 2c) to the notice of deficiency accurately reflects the amount of itemized deductions that Petitioners are entitled to with respect to Petitioners' tax years ended December 31, 2005, December 31, 2007, and December 31, 2009.

l. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 3 (Itemized Deductions), that Petitioners' income should be increased for the tax years ended December 31, 2005, December 31, 2007, and December 31, 2009 in the amounts of $3,933, $3,025, and $1,279, respectively.

m. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 4 (Alternative Minimum Tax), that Petitioners' alternative minimum tax should be adjusted for the tax years ended December 31, 2005 and December 31, 2010.

n. The Commissioner erred in determining at p. 4 of 14, Explanation of Items, enumerated paragraph 4 (Alternative Minimum Tax), that Exhibit 3 (including Exhibits 3a and 3b) to the notice of deficiency accurately reflects Petitioners' alternative minimum tax.

 

a. Deeridge Farms Hockey Association is an S corporation, and Petitioners are the sole shareholders of that entity. Deeridge operates the Boston Bruins, a National Hockey League ("NHL") team. The adjustments at issue in the notice of deficiency relate to expenses of the Bruins, and therefore, for the sake of convenience, Deeridge is referred to herein simply as "the Bruins" or "the club."

b. The nature of the Bruins' business involves being a world-class hockey team that provides entertainment to hockey fans who watch the Bruins' games. This entertainment is sold to these fans as part of a bone fide transaction.

c. The Bruins play 41 regular season home games and 41 regular season away games, and approximately 4 preseason home games and 4 preseason away games, during each NHL season.

d. The club's business -- and the NHL in general -- simply could not function if the club did not travel to "away" cities for half its games.

e. For each away game, the Bruins travel to the away city and set up a base of operations at a local hotel.

 

f. The core of the Bruins' business, its "hockey operations," consists of 22 hockey players plus the general manager, various coaches, medical trainers, equipment managers, public relations staff, and logistics managers. With the exception of some of the club's employees involved in scouting, the Bruins' entire hockey operations group travels to the away city on the evening before an away game and checks into the hotel there.

g. The away city hotel is the club's business premises during the club's travels in the away city.

 

h. There are usually two mandatory meals at the hotel -- breakfast and then a mid-afternoon "pre-game meal" on the day of the game. These meals -- in addition to the mandatory meetings among players and coaches -- are critical to each Bruins player's job and to the club's ultimate purpose of playing, and winning, professional hockey games.

 

i. In short, the pre-game mandatory meals and the meetings at away city hotels allow the club and the players to prepare for the upcoming game -- both physically and mentally. In this regard, the pre-game meals and the meetings serve as a necessary component of the Bruins' hockey operations.

j. On its tax returns for its tax years ended December 31, 2007, December 31, 2008, December 31, 2009, and December 31, 2010, the club deducted the full amount of the costs that it incurred in providing pre-game mandatory meals at away city hotels, rather than limiting the deduction to fifty percent of the cost of the meals pursuant to Code section 274(n)(2). Because the club is an S corporation, Petitioners reported these deductions on their tax returns for the same years as flow-through items.