With all the talk about Sarah Palin's clothing the couple I heard of a thing referenced as the Ozzie Nelson Law. I tried googling it but didn't come up with much. Seems like Ozzie was trying to and won being able to deduct their clothing from the show. Here's the little that I found. Has anyone else ever heard of this law or know anything more about it??

An ongoing free-flow of discussion on the TaxProf listserve has thrown out a number of interesting ideas. Riffing on them, I'll add the following. Perhaps the use by Palin is just like actors who wear wardrobes provided by the producers, so not income at all, based on an arguably relevant analogy in the Ozzie Nelson case (a deduction for wardrobe expenses for the family's outfits on their pre-reality-shows reality show, for clothes that they claimed were too hot to be suitable for their real California lifestyle).

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was Oswald "Ozzie" Nelson and family.

Nelson v. Commissioner, T.C. Memo 1966-224

Here's an excerpt:

"In their television series, "The Adventures of Ozzie and Harriet," the petitioners, along with their two sons, portrayed an average American family, with certain reasonable exaggerations."

A case decided in 1966 (Nelson, Oswald, TC Memo 1966-224) allowed an actor to deduct clothing even though it was suitable for general or personal wear. The deciding factor in this case was that the clothes were kept at the studio, and never worn outside of the TV set.

With all the talk about Sarah Palin's clothing the couple I heard of a thing referenced as the Ozzie Nelson Law. I tried googling it but didn't come up with much. Seems like Ozzie was trying to and won being able to deduct their clothing from the show. Here's the little that I found. Has anyone else ever heard of this law or know anything more about it??

An ongoing free-flow of discussion on the TaxProf listserve has thrown out a number of interesting ideas. Riffing on them, I'll add the following. Perhaps the use by Palin is just like actors who wear wardrobes provided by the producers, so not income at all, based on an arguably relevant analogy in the Ozzie Nelson case (a deduction for wardrobe expenses for the family's outfits on their pre-reality-shows reality show, for clothes that they claimed were too hot to be suitable for their real California lifestyle).

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was Oswald "Ozzie" Nelson and family.

Nelson v. Commissioner, T.C. Memo 1966-224

Here's an excerpt:

"In their television series, "The Adventures of Ozzie and Harriet," the petitioners, along with their two sons, portrayed an average American family, with certain reasonable exaggerations."

A case decided in 1966 (Nelson, Oswald, TC Memo 1966-224) allowed an actor to deduct clothing even though it was suitable for general or personal wear. The deciding factor in this case was that the clothes were kept at the studio, and never worn outside of the TV set.

Even though I'm not a lawyer it would sound like that paragraph would clinch it. And Ozzie was practically a lawyer anyways - I think he just stopped short of taking the bar exam.

Even though I'm not a lawyer it would sound like that paragraph would clinch it. And Ozzie was practically a lawyer anyways - I think he just stopped short of taking the bar exam.


I agree, since the clothing never left the studio it could be considered "specialized" and therefore deductible. I work in an accounting office and my boss seems to remember that the IRS assessed over$100,000 against the Nelsons for a number of years. It would be great to get a copy of the whole case which I am trying to do.

Yeah, I can't imagine Ozzie actually needing all those Alpaca sweaters in Southern California! :lol:

I found a complete copy of the case, I apologize for the length but it makes for good reading.

CCH Dec. 28,141(M)]
Oswald "Ozzie" G. Nelson and Harriet Hilliard Nelson v. Commissioner

Docket Nos. 409-65, 4493-65, 25 TCM 1142, TC Memo. 1966-224, Filed October 11, 1966

[1954 Code Sec. 162 ]

Business expenses: Clothing: Television actors: European trip.--By use of the Cohan rule, the Court determined the amount which the petitioners could deduct as ordinary business expenses for the cost of clothing which they purchased for use on their television show. A portion of the petitioners' expenses incurred on a European trip was also allowed as a business expense deduction.--CCH.


Alan N. Halkett, for the petitioners. Earl Gardner, for the respondent.


Memorandum Findings of Fact and Opinion


WITHEY, Judge:


Deficiencies in the income tax of petitioners have been determined by the Commissioner for the following taxable years in the amounts set opposite each year:


Docket No. Year Amount
409-65 ........ 1954 $9,872.42
1955 5,231.23
4493-65 ....... 1956 3,921.32
1957 5,166.31
1958 4,419.61
1959 3,249.11
1960 2,607.30
1961 2,896.02
1962 1,811.25



Of the issues presented by the pleadings petitioners have conceded the correctness of respondent's determination in disallowing dependency exemptions for their children. There remains for decision the correctness of respondent's disallowance of claimed business expense deductions relating to the cost of clothing purchased and his disallowance as a claimed business expense of the cost of a trip to and from Europe in the year 1954. An issue relating to the adjustment of a medical expense deduction is conceded to depend upon the decision reached on the first two issues.


Findings of Fact


The facts which have been stipulated are found accordingly.


Petitioners are husband and wife and reside at Hollywood, California. The returns for all of the periods here involved were filed with the district director at Los Angeles, California.


During each of the years here involved petitioners were actors, and specifically, were the principal actors in the television series known as "The Adventures of Ozzie and Harriet." Petitioners' two children, David and Eric, were also actors and during each and all of the years here involved appeared regularly in the television series.


When, in the production of the television series, clothing worn by petitioners was to be intentionally destroyed or damaged, such clothing was supplied to petitioners at no cost to them. When, in the production of the television series, petitioners were required to wear special items of clothing, such as "period" costumes, such clothing was, with minor exceptions, supplied to petitioners at no cost to them.




In their television series, "The Adventures of Ozzie and Harriet," the petitioners, along with their two sons, portrayed an average American family, with certain reasonable exaggerations.


The basic setting for the series was the petitioners' home (i.e., a "home" constructed at the studio). From time to time, scenes were shot on location in such areas as Griffith Park, Beverly Hills, or in various stores.


Some of the clothing purchased by the petitioners for use during production of their television series was suitable for their personal wear, and was in fashion at the fime it was purchased. It was purchased by petitioners specifically for use in the production of the television show and was not worn by them for their personal use, except that on rare occasions petitioner Oswald Nelson used isolated items of such clothing for a specific, and temporary, personal use, such as the use of a heavy sweater at a football game.


During the years in question the petitioners employed, on a full-time basis, a wardrobe man whose duties included seeing that the clothing had been cleaned and pressed, and seeing that the petitioners were in the proper clothing for a particular scene. In addition, he was responsible for the "accuracy" of the wardrobe. The wardrobe man worked exclusively for the petitioners.


The clothing worn by petitioners in the production of the show was subjected to severe wear and tear. The working conditions at the studios, including the heat from studio lights and dirt from the production stages, required almost daily cleaning of the clothes which were worn, with resultant deterioration.


In addition to the clothing which was purchased specifically for use in the production of their television show, petitioners also sometimes wore items of their own personal clothing on the show. They included no portion of the cost of such personal clothing as a business expense, and no deduction was claimed by them for the use of such personal clothing.


The clothing purchased by petitioners for use in the production of their television show was, until disposed of, kept at the studios. At the end of a "shooting" season, the wardrobe remained in the studio and was placed in mothballs and zipper bags and was not taken home.


Some of the wardrobe clothing was not suitable for personal use in the area where petitioners resided. The show depicted the average family, and did not specify its locale as being in southern California. During most of the months when the show was being shown the clothing used on the show was much heavier than clothes normally suitable for wear in southern California.


During the production of the television series, retention at the studio of clothing worn by the principal actors was required. Upon occasion petitioners had to reenact certain scenes, so that the same clothing must be available and worn during such reenactments.


Petitioner Oswald Nelson used a "system" for differentiating between his personal and his business wardrobe clothing. Petitioner would charge his purchases for wardrobe clothing; when the bills, or invoices, were received for this clothing, checks were prepared for his signature; and at that time petitioner would inform his secretary as to which items of clothing were for business purposes. These records were then turned over to petitioner's accountant. A similar procedure was used by petitioner Harriet Nelson.



During the period of the year when production of the television series was in progress, petitioners worked 12 to 13 hours per day, 5 and sometimes 6 days per week. Petitioner Oswald Nelson's typical workday was from about 8:30 a. m. until about 7:30 p. m. Petitioner Harriet Nelson's typical workday began about 7 a. m. and ended about 7:15 p. m.




Petitioners' cost of wardrobe for their television show was as claimed in their income tax returns for each year at issue. Their expenditures for personal clothing for each year, except 1954 and 1955, was an average of slightly over $2,000.


Petitioners' cost for such television wardrobe was ordinary and necessary in the carrying on of their business as it relates to clothing used by them. Petitioners' sons David and Eric used an undisclosed portion of the television wardrobe for their personal purposes unconnected to the show to an undisclosed extent.





Opinion


As we read respondent's brief, we believe his position with respect to the clothing issue to be that because, as he contends, petitioners kept no adequate books and records of their inventory of such clothing, the cost thereof, and such salvage value as remained on its disposition, together with the fact that such clothing was "suitable" for their personal wear, decision should follow that they have not "substantiated" any greater such expense than respondent has allowed as set forth in our findings. We think respondent's position is not entirely supported by the record or by the applicable law. Section 162(a) , Internal Revenue Code of 1954. 1


We find that although petitioners did not themselves maintain records which would satisfy an accountant's definition of adequate books and records, they did nevertheless retain the invoices for such clothing, including such as was purchased for their personal use, and that they also preserved the canceled checks representing payment of such invoices; that, as such invoices were paid, segregation was made by them of such clothing payments between personal and business purchases. We think this method, though admittedly not ideal especially where such a large inventory is concerned, nevertheless accurately disclosees the actual cost of their television wardrobe. Indeed respondent does not contest the cost thereof. Such personal use of such clothing as the record discloses is so little as to be de minimis on the part of petitioner Oswald Nelson. No indication of personal use thereof by Harriet Nelson may be concluded from the evidence before us.


No contention is made here that the amounts spent by petitioners for television clothing were unreasonable nor is any contention made that any personal use was made thereof other than its wearing by members of petitioners' family for nonbusiness purposes.


Petitioners' workday hours in the producing of some 288 half-hour episodes of "The Adventures of Ozzie and Harriet" over the 9 years here involved, coupled with the fact that they do not "go out" very often, leaves it difficult to conclude that they had time or the occasion to use their television clothing for personal purposes to the extent indicated by respondent's disallowance.


Scrutiny of this record, however, fails to disclose any evidence regarding the personal use or non-use of the television wardrobe by petitioners' sons. It is true that there is evidence of the fact that such clothing was kept at the respective studios where the show was produced, but this fact alone is not sufficient to supply the lack in petitioners' burden of proof particularly in view of the fact that Oswald Nelson's de minimis use of such clothing indicates its availability for personal use. We believe such evidence was available to petitioners and its absence here is unexplained. Because of this failure to overcome respondent's presumption of correctness in his determination of deficiencies, we find that petitioners' proper deduction for television clothing expense for each year is as follows:


Year Amount
1954 .... $ 6,737.16
1955 .... 6,887.49
1956 .... 8,599.63
1957 .... 12,341.18
1958 .... 10,334.04
1959 .... 8,998.97
1960 .... 6,957.00
1961 .... 6,987.50
1962 .... 6,037.50


Cohan v. Commissioner [2 USTC ¶489 ], 39 F. 2d 540.






Decisions will be entered under Rule 50.


1 SEC. 162 . TRADE OR BUSINESS EXPENSES.


(a) In General.--There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business * * *