James Avery v. Comm., TCM 2023-18

Avery was an attorney who got involved in showing collector cars as a way to meet potential clients. He later moved on to car racing by attending a racing school, purchasing and rebuilding a 2000 Dodge Viper.

Avery claimed racing-related expenses of $355,000 as advertising for his law practice over six years (all in even dollar amounts – $50,000 for both 2008 and 2009; $60,000 for both 2010 and 2011; $65,000 for 2012; and $70,000 for 2013). Avery’s name appeared on a small area above the driver’s window and passenger window. There was a decal for his sponsor, Avery Law Firm, on the back tail of the car. He believed that the tail decal functioned as advertising for his law practice. The Court noted that, “This form of ‘signage’ is at the opposite end of the spectrum from (say) a billboard or a newspaper ad.” While the Court agreed that car racing was a good conversation starter, it found that any other sport or hobby would serve the same function and could eventually lead to a business relationship. The possibility of developing business from these potential encounters does not “convert the costs of pursuing a hobby into deductible advertising expenses.” Only the amounts previously conceded by the IRS were allowed.