This is the final post in a three part series that addressed tax issues of travel. Prior posts included deducting domestic and foreign travel and deducting travel expenses of a spouse. This post will focus on attending conventions outside the United States, including conventions on cruise ships.
To take a deduction, taxpayers must pass additional hurdles to show that the convention, seminar, or similar meeting outside North America or on a cruise ship directly relates to the conduct of their trade or business. The North American area includes the U.S., its possessions, the Pacific Islands Trust Territory, Canada, Mexico, and certain Caribbean countries.
To deduct expenses of a convention outside the North America, the taxpayer must establish that it is reasonable for the meeting to be held outside North America. The reasonableness of the location includes factors such as:
- The purpose and activities of the meeting
- The sponsoring organization
- The residences of the organization’s active members
- The location of other meetings
In addition, the time spent in business meetings must be substantial when compared to the time spent sight-seeing and in other recreational activities; otherwise the trip will be considered a personal vacation and only the registration fees of the business meeting and other direct business expenses are deductible.
Example: Jethro, who lives in Michigan, is considering opening a business in Italy. He attends a 3 day seminar in Italy, organized by Italian accountants and attorneys, that explains the nuts and bolts of conducting business in Italy. Since the seminar’s purpose is to explain how to conduct business in Italy, and the seminar is sponsored by Italian business and legal professionals, it is reasonable for the seminar to be held outside North America. John can deduct his travel expenses to Italy, his lodging and meals, and incidentals. However, the time spent in the seminars must be substantial compared to his recreational activities in Italy or the travel expenses (with the exception of the seminar fees) will be nondeductible.
Example 2: Elly May is a successful attorney in Michigan. Her local bar association holds a convention in Paris that addresses legal practice in Michigan. It is probably not reasonable for a convention addressing Michigan law to be held in Paris. Therefore, her travel costs to Paris will not be deductible. However, she may take a deduction for the convention’s registration fees.
Conventions on Cruise Ships
Deductions for conventions on cruise ships are limited to $2,000 per person per year.
Additionally, deductions are allowed only if the ship is a U.S. registered vessel, and all of its ports of call are in the U.S. or its possessions. A taxpayer must also attach the following written information to her return for the year the deduction is claimed:
- A statement signed by the taxpayer showing the number of days of the trip, the number of hours each day spent attending scheduled business activities, and the program of the convention’s scheduled business activities
- A statement signed by an officer of the sponsoring organization that includes a schedule of each day’s business activities and the number of hours the taxpayer attended those meetings
Guess what? The IRS doesn’t like conventions on cruise ships!
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Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.
Any tax advice contained in the body of this post was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Any information contained in this post does not fall under the guidelines of IRS Circular 230