Citation: Ralph Louis Vitale, T.C. Memo. 1999-131
1. Was Vitale in the trade or business of being an author during the years in issue?
2. If so, are the expenses Vitale incurred deductible as ordinary and necessary under Section 162?
3. Has Vitale adequately substantiated his travel expenses under Section 274(d)?
Vitale worked as a full-time budget analysis for the U.S. Department of the Treasury, where he was required to apply professional level writing ability to create high quality written work. He also served as editor of an in-house newsletter to the Treasury. Two years before his retirement, the petitioner began writing outside of his full-time position in hopes to make it a second career. While pursuing his writing interest, Vitale had the idea for a second book to be based upon the story of two men who travel across the country to patronize a legal brothel. He decided to visit various legal brothels in Nevada in order to help develop characters for his book, and to validate his story. The petitioner kept a logbook containing the dates (sometimes hours) and names of the brothels he visited, the prostitutes he met, the amount of cash spent on each, and personal information about the prostitutes he made contact with. Prior to the book being released, the petitioner actively participated in the publication and the promotion stages of his book.
Vitale’s writing activity is considered a trade or business. It was proven that the petitioner entered into this activity with the intent of making a profit. The petitioner was allowed a $4,350 deduction for a joint venture payment that was considered an other expense. Under the Cohan rule, the petitioner was allowed a deduction for office expenses of $400 for each year, 1993 and 1994. Due to lack of substantiation, the petitioner was not allowed a deduction for advertising, commissions and fees, supplies, or utilities expenses.