Sam Gilliam who is the plaintiff in the case was a well-known artist with a master's degree from the University of Louisville. Mr. Gilliam resided in Washington Dc and received invitations to give out lectures at various institutions all over the country. On this occasion, he got an invitation to address the students at Memphis Academy of Arts. The plaintiff has had a history of mental and emotional distress over the years and has been hospitalized. On the day before he flew to Memphis, he felt anxious and called a doctor he has been seeing over the years who gave him some.
This time around the doctor prescribed to Gilliam a different drug by the name Dalmane. He took the medications some hours before the flight to Memphis and started acting delirious while on the plane. During the melee at the American Airlines Flight Gilliam injured another passenger with a telephone receiver. Both criminal and civil proceedings were brought out against him because of his conduct. He was freed on the criminal charges for being temporarily psychotic. The cases cost the petitioner over $20,650. As such Gilliam wanted the amounts to be reduced from his tax returns. The judge was to decide if the plaintiff should be allowed tax deductions that were incurred during both the criminal and civil suit.
The petitioner relied on a previous precedent to support his claims. He cited Clark v. Commissioner, Dancer v. Commissioner and Commissioner v. Teller. In the first case Dancer v. Commissioner, the judge says any legal matter arising during the course of a business trip is a business expense. But this cannot be applicable as what happened to the Petitioner was not in any way related to income earning for his business thus cannot be compared ("GILLIAM V. COMMISSIONER | 51 T.C.M. 515 (1986) | Ztcm5151437 | Leagle.Com").
Consequently, the court did concur with the respondent that the expenses Mr. Gilliam is claiming are not a day to day expenses of normal business. The respondent here is the internal revenue service commissioner. The judge applied section 162(a) which stipulates that the amounts that qualify to be exempted from taxation should be derived from the normal expense of a particular trade ("GILLIAM V. COMMISSIONER | 51 T.C.M. 515 (1986) | Ztcm5151437 | Leagle.Com"). Thus it means if the amount is not dispensed the activities of the business will be affected.
Furthermore, the judge ruled that the occurrence at the plane cannot be deemed as a normal frequent business occurrence.
I do agree with the judge that the events that transpired cannot be taken as a normal business activity. It is important to note that an allowable business expense can reduce the tax obligations of an individual or business entity. For an expense to be recognized as an allowable business expense it must meet certain criteria as stipulated by the law.
Firstly, the cost incurred should be related to the operations of the business. Moreover, the owner of the enterprise must produce documentation to support the expenditure and provide proof of how the expense led to the company to earn income. Lastly, the expenditure must have occurred. Meaning if one has not yet paid for the expense and it has occurred it's still a business expense. Though am sympathetic to Mr. Gilliam case because it is the medicine he took that made him delirious in the plane but the criminal and civil case are not a normal day to day business activities that bring income.
"GILLIAM V. COMMISSIONER | 51 T.C.M. 515 (1986) | Ztcm5151437 | Leagle.Com". Leagle, 1986, https://www.leagle.com/decision/198656651dztcm5151437.
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