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Tax Tidbit 1/09: Business Trips That Mix Business with Pleasure

Despite improved communications by teleconferencing, faxes and the Internet, business travel has increased dramatically over the past several years. Many taxpayers are beginning to plan trips that combine elements of both business and pleasure. Business trips, conventions, and continuing education seminars are frequently planned to incorporate exotic locations and leisure time. With proper planning, these trips can yield great personal pleasure while at the same time generate legitimate deductions. Although the fundamental rules are relatively simple, there are a number of interesting angles.

Business Travel - The Rules: Taxpayers who travel away from their tax home on business are permitted to deduct travel expenses, including fares, meals, lodging, and incidental expenses, if they are not otherwise lavish or extravagant. Naturally, you are not prohibited from enjoying nonbusiness or personal activities while on a business trip, but the primary reason for the trip must be related to your trade or business.  As always, documentation of your business related activities is important.

Foreign Travel: Foreign travel expenses are subject to some limitations that are not applicable if the business trip is within the United States. Some of an individual's foreign travel expenses may not be deductible if he or she takes part in substantial nonbusiness activity during the trip. A day is counted as a business day if any of the following factors are present: 

• The individual was traveling to or from an overseas destination in pursuit of a trade or business.
• The individual's presence outside the U.S. on that day was required at a particular place for a specific and bona fide business purpose.
• The individual was prevented on that day from engaging in the conduct of his or her principal business activity due to circumstances beyond his control.
• The day was a Saturday, Sunday, legal holiday or other reasonably necessary stand-by day, which intervened during the course of the taxpayer's trade or business.

Conventions and Seminars. Expenses for both self-employed persons and employees to attend a convention or seminar in the U.S. may be deductible if there is a sufficient relationship to the taxpayer's trade or business. Special rules apply to conventions and seminars held on cruise ships or those held outside the United States.

Staying Over. It is sometimes economical for a business traveler to stay over Saturday night although business was concluded on Friday. In such situations, the additional meals and lodging expenses for the Friday/Saturday mini-vacation may be written off entirely as part of the deductible as ordinary and necessary expenses of the trip.  When on a business trip during the week, if a certain day is devoted primarily for pleasure, that day's expenses are not deductible. 

If you devote over half of the time you spend away from home on pleasure none of the transportation expenses to and from the location would be deductible. On the other hand, if more than half of the trip is devoted to business, all of the transportation expenses may be written off as a business expense. 

We encourage you to contact our office to discuss in more detail how the new Emergency Economic Stabilization Act of 2008 applies to you and your business.  Andrew D. Ross, CPA of Bedard, Kurowicki & Co., CPA's, PC (908) 782-7900 x 113, adr@bkc-cpa.com, or visit www.bkc-cpa.com.