In a recent Tax Court decision, the taxpayer, who resided in New York, began employment as a salesman for clothing designer, marketer and distributor Ralph Lauren. That Company required all employees who worked in corporate sales positions to wear Ralph Lauren apparel while representing the Company. Consequently, the taxpayer purchased Ralph Lauren shirts, pants, ties and suits.
The taxpayer then deducted, as an employee business expense, the cost of his employer’s brand clothing that he had purchased as condition of employment.
Upon examination, the Internal Revenue Service issued a notice of deficiency disallowing the deduction. The Tax Court agreed with the Internal Revenue Service, concluding that because the clothes were suitable for personal wear outside the workplace, the cost to acquire and maintain the clothing was a nondeductible personal expense.
The Tax Court reinforced its three-prong test for deductibility that the clothing must: (1) be required or essential in the taxpayer’s employment; (2) not be suitable for general or personal wear; and (3) not be worn for personal use.
In addition to losing the argument and being assessed additional tax for the accuracy-related penalties were also applied.
The case is referred to as Terence K. Barnes , TC Memo 2016-79 (Tax Ct.)