Normally, a business owner can deduct its “ordinary and necessary” operating expenses, even if they appear to be “extraordinary” to some observers. This may include marketing expenses that rely on high-profile celebrities to promote the business.
However, as shown in a new case involving a social media influencer, Sami TC Memo 2026-69, 8/18/26, these expenses must be attributable to business activities—not just the owner’s personal agenda.
Facts of the new case: The taxpayer, a resident of New York, was a full-time employee for JetBlue in its IT department. He worked out of the company’s office in Queens, taking the subway to and from work, although he worked remotely during the COVID-19 pandemic. JetBlue placed no restrictions on when he had to work.
But the taxpayer was also a true go-getter. In addition to his full-time job, he formed a limited liability company (LLC) encompassing three business components: (1) transportation services, (2) event ticket sales and (3) social media influencing. He reported the combined LLC activities on Schedule C for 2019-2021, the three tax years in question. His annual gross receipts ranged from about $100,000 to $150,000.
For the transportation business, the taxpayer owned or leased luxury vehicles for hire. He didn’t keep records of the exact mileage driven. But he did provide records of the starting and ending cities (or boroughs, if in New York City) of each trip and later used Google Maps to estimate the total mileage driven for each tax year.
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Combining the transportation business with another activity, the taxpayer also sold difficult-to-obtain tickets to events. He used his American Express Platinum card and “networking” connections to procure tickets not easily available to the general public.
Finally, the taxpayer maintained social media accounts—including TikTok, Instagram and X—and attracted hundreds of thousands of followers. Many posts on these social media platforms were pictures or videos of athletes, World Wrestling Entertainment (WWE) wrestlers or other celebrities. Sometimes the taxpayer was featured in the photos; other times he was behind the lens.
During the tax years in question, the taxpayer paid large sums for exclusive experiences such as a trip to the Grammys, attending the Emmys and meet-and-greets with Matt Damon, Benedict Cumberbatch, Mark Ruffalo and other celebrities. He has hobnobbed with the likes of President Donald Trump, Kobe Bryant, Kanye West, Ice Spice, Tom Brady, and former Presidents Bill Clinton and Barack Obama. Many of these encounters were staged experiences. The IRS disallowed deductions for payments relating to these events.
Tax outcome: The taxpayer argued that payments for entertainment events and celebrity interactions constituted “marketing” of his social media activities. However, it was determined that the expenses were primarily personal in nature. Therefore, they are not deductible as business expenses, even though resulting social-media posts may have increased views and followers.
However, the Court allowed deductions for portions of vehicle, toll, parking and telephone expenses and credit-card processing fees he incurred to the extent they were substantiated. Furthermore, he was able to claim the “qualified business income” (QBI) deduction under Sec. 199A of the tax code.
Postscript: The IRS may not follow you on social media, but it might investigate business deduction claims that appear to be suspicious. Be prepared to prove the business nature of your write-offs.
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