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. Have a tax vacation by taking your spouse to the next convention. The tax law can get downright unfriendly when it comes to deducting your spouse on a convention trip. Yet, most trade associations design their annual conventions to be a combination of business and pleasure, with spouses accompanying the business member of the family. Unfortunately, there is still great confusion concerning the current tax law -- starting in 1994 -- and the old law. Here's the story: Under the old law, you could write off the cost of bringing your spouse (or any other family member) on a trip if there was a bona fide business purpose for your spouse's presence. For example, when the president of Walt Disney Productions took his wife with him on a three-month business trip around the world, her travel expenses were allowed as a business expense. Why? His wife's presence at film showings, social gatherings and meetings with the press and public enhanced the company's family image. Well, here are the unwelcome current rules: No deduction is allowed for your spouse's travel expenses unless (1) there is a bona fide business purpose for your spouse's presence (same as the old rule) and (2) your spouse is also an employee of your business. The same rule ((???)) apply to your dependents or any other person accompanying you on a business trip. The Disney example would flunk under the present law, unless the president's wife worked for the company. So here's the tax-saving move to remember: put your spouse on the payroll and pay a salary appropriate (what you would pay a stranger) for services actually rendered. Your spouse must be a bona fide employee but is not required to be a full-time employee. Next, let's explore a different, but very practical, fact pattern -- you travel for valid business reasons and your better half just travels along. What are the tax rules? Sorry, you can't deduct your spouse's travel expenses. But you'll like this basic rule -- you can deduct the same amount it would have cost you, just as if you had traveled alone. You are not limited to one-half of the total expenses. For example, the airlines often have a special deal if you travel with your spouse. You get a deduction equal to the fare for a single traveler. Or suppose you drive to a business convention. The entire transportation cost is deductible because the cost is the same whether you drive alone or not. Lodging expenses give you another tax break. You can deduct the cost of a single room. For example, if the charge for a single room is $100, and a double room costs $120, your deduction is a full $100. Want to learn how to capture every dollar of business expense you are entitled to under the law? Send for the triple-threat set of Special Reports, The Complete Guide to Building Your AUTOMOBILE Deductions, The Complete Guide to Building Your ENTERTAINMENT Deductions, and The Complete Guide to Building Your TRAVEL Deductions, $25 each ($59 for all three). Send to Book Division, Blackman Kallick Bartelstein, LLP, 300 South Riverside Plaza, Chicago, Illinois 60606.