## Facts

- Sidney Blackmer was a professional theatrical actor.
- On his 1927 federal income tax return, he deducted $1,687.10 as “entertainment and publicity expenses.”
- The expenses included complimentary theater tickets, meals, and other hospitality provided to reporters, actors, producers, and other industry contacts to generate publicity and goodwill.
- Blackmer testified that the expenditures were incurred to increase his popularity, secure engagements, and improve his earning prospects, and he provided an itemized explanation of whom he entertained and the business purpose for doing so.
- He lacked complete contemporaneous books and records; although he had some bills and statements, they were not introduced before the Board of Tax Appeals.
- The Commissioner disallowed the deduction and assessed a $50.61 deficiency; the Board of Tax Appeals sustained the disallowance.

## Issues

1. Whether the taxpayer’s entertainment and publicity outlays were “ordinary and necessary” expenses of carrying on his trade or business as an actor and therefore deductible.
2. Whether the expenses were instead nondeductible personal (or otherwise non-business) expenditures.
3. Whether credible, detailed testimony could substantiate business expenses when formal documentation was incomplete.

## Decision

- The Second Circuit reversed the Board of Tax Appeals.
- The court held the claimed entertainment and publicity expenditures were ordinary and necessary business expenses of a professional actor and were deductible.
- The court accepted Blackmer’s uncontradicted testimony and the evidence of industry practice as sufficient substantiation despite imperfect recordkeeping.

## Legal Principles

- An expense is deductible as an “ordinary and necessary” business expense when it is reasonable in amount and bears a direct relationship to the taxpayer’s trade or business.
- Expenses may be “ordinary” when they are customary in the taxpayer’s line of business, including promotional expenditures intended to generate goodwill and business opportunities.
- “Necessary” in this context means appropriate and helpful to the business, not indispensable.
- Entertainment-type expenditures are not automatically personal; they are deductible when the primary motive is business promotion and the taxpayer credibly establishes their business purpose.
- While records are important, credible, detailed, and uncontradicted testimony can substantiate the business character and amount of expenses when documentary proof is incomplete.

## Conclusion

The court ruled that a professional actor could deduct customary entertainment and publicity costs incurred to maintain goodwill and obtain engagements as ordinary and necessary business expenses, and that credible testimony could establish deductibility even without complete contemporaneous documentation.


Blackmer v. Commissioner, 70 F.2d 255 (2d Cir. 1934)