TAX CORNER
Irv Blackman and Brian Whitlock are CPAs with Blackman Kallick Bartelstein, LLP in Chicago. Also lawyers, they specialize in business succession and wealth transfer and are sought-after speakers. Want to consult? Need a second opinion?...Call Irv or Brian, 312-207-1040. YOU CAN MIX PLEASURE WITH A BUSINESS CONVENTION Do you believe those make-it-tax-deductible ads describing a business convention in Hawaii and boasting about mixing business with pleasured? Will the IRS stand still for such a tax giveaway? Yes! But first a warning: Many of those ads are tax traps. Deducting business conventions mixed with travel-pleasure trips is much more difficult, according to the IRS, than the advertisements claim or imply. Yet, if done right, it is easy to be a tax winner. Here is the general rule: Travel expenses incurred to attend a convention are deductible if your attendance benefits or advances your trade or business. The IRS allows or disallows the deduction based on whether it thinks you took the trip primarily for (1) business or (2) pleasure, and scrutinize carefully how you claim your time was divided between these two activities. For example, a convention held in sunny Palm Beach is more likely to attract IRS scrutiny than a convention in overcast Seattle. This is the key: regardless of the site, if the purpose of the trip is truly primarily for business, it is deductible. On the other hand, that part of the trip or attendance at the convention attributable to pleasure, except for incidental activities, is not. Conventions in the U.S. -- The business portion of such trips is fully deductible. This includes travel expenses such as airfare, lodging and meals, tips, telephone, telegraph and taxicab costs -- all 100 percent deductible, except meals which are only 50 percent deductible. It also includes the business expense of the convention or seminar registration fees. Expenses incurred strictly for pleasure are not deductible. Conventions Outside the U.S. -- If the temptation to deduct travel within the United States is great, then the temptation to deduct travel expenses for conventions abroad is irresistible. First, it must be shown that it was "as reasonable" to hold the convention outside North America (which includes the U.S., Canada, Mexico and certain Caribbean Basin and Central American countries) as inside. If that is done, the costs are 100% deductible if: 1. the trip is for seven consecutive days or less; and 2. less than 25% of the time is spent on pleasure activities; or 3. the taxpayer had no control over the travel (i.e., it was at the behest of and on behalf of his employer); or 4. the taxpayer can substantiate that the trip and convention were primarily for business purposes and not for obtaining a personal vacation or holiday. Otherwise, you must allocate your trip between business and vacation days, deducting only expenses for business days. The entire trip does not have to be primarily for business. For example, if only five out of 15 trip days are spent at a foreign convention on business, those five days' expenses are deductible. Cruise Ship Convention -- You've heard of a floating crap game. How about a floating tax deduction? Deductions for conventions held on cruise ships are deductible if, in addition to the limitations in general listed above, the ship is registered in the U.S. and all its ports of call are located in the U.S. or its possessions. The deduction is limited to $2,000 per individual per year. Would you like to learn how to deduct the maximum amount of your travel and entertainment expenses legally? Send for the companion Special Reports: (1 ) The Complete Guide to Building Your TRAVEL Deductions...Legally; (2) ...ENTERTAINMENT Deductions; (3) ...AUTO Deductions -- $25 each or $57 for all three. Mail to Book Division, Blackman Kallick Bartelstein, LLP, 300 South Riverside Plaza, Chicago, Illinois 60606.