Taxing Lessons Case Summaries

Case — Exception to 50% Limitation for Business Meals

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TL Case Summ


Does a fisherman qualify for an exception to the rule that limits the deduction for business meals to 50% of cost?


Taxpayer Says: The meal expenses are 100% deductible under an exception to the general rule limiting those deductions. The exception applies when Federal law requires crew members of a commercial vessel be provided with meals.

Internal Revenue Service Says: The exception does not apply to fishing vessels. The deduction for meals should be limited to 50% of cost.


From Internal Revenue Code Section 162(a)(2): Permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year. Specifically includes traveling expenses (including amounts expended for meals and lodging other than amounts that are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.

From Internal Revenue Code Section 274(n)(1)(A): Provides that the amount allowable as a deduction for any meal expense is limited to 50% of the amount of the expense that would otherwise be allowable.

From Internal Revenue Code Section 274(n)(2)(E): Provides an exception to the 50% limitation on the deductibility of meal expenses when the expense is for meals required by any Federal law to be provided to crew members of a commercial vessel.

From United States Code (Federal Law) Title 18, Section 2191 (2000): Whoever, being the master or officer of a vessel of the United States, on the high seas, or on any other waters within the admiralty and maritime jurisdiction of the United States, flogs, beats, wounds, or without justifiable cause, imprisons any of the crew of such vessel, or withholds from them suitable food and nourishment, or inflicts upon them any corporal or other cruel and unusual punishment, shall be fined under this title or imprisoned not more than five years, or both. [Emphasis added]

From United States Code (Federal Law) Title 46, Section 10303 (2000): (a) A seaman shall be served at least 3 meals a day that total at least 3,100 calories, including adequate water and adequate protein, vitamins, and minerals in accordance with the United States Recommended Daily Allowances. … (c) This section does not apply to a fishing or whaling vessel or a yacht.


Among other restrictions, the deduction for business meals and entertainment is usually limited to 50% of your cost. However, the tax code provides exceptions that allow you to deduct some of these expenses in full on your business tax return. One of these exceptions is meals provided to crew members of commercial vessels when those meals are required under Federal law.

In this case, the taxpayer believes Federal maritime laws contain a requirement for the provision of meals to seamen, and so the meals deduction taken on his federal income tax return qualifies for the exception to the 50% limitation. The IRS takes the position that the exception to the 50% limitation rule does not apply to fishing boats.


Make your selection, then see “The Court’s Decision” below for a full explanation

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HL Carpenter, an experienced investor and a CPA, specializes in reader friendly articles on taxes and investing for individuals and small businesses, and publishes two newsletters: Taxing Lessons and Top Drawer Ink. Visit and

This information should not be considered legal, investment or tax advice. Taxing Lessons and Top Drawer Ink Corp. do not provide legal, investment or tax advice. Always consult your legal, investment and/or tax advisor regarding your personal situation.


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For the IRS. Federal law specifically tailored to fishing voyages is codified in 46 USC sections 10601 through 10603 (2000) and does not contain any requirement that seamen employed on fishing vessels be provided with food or beverages. (Section 2191 relates to cruel and unusual punishment, not a duty to provide food and beverage to all seamen.) The exception to the 50% limitation rule does not apply.