Posted by: Garcia & Cuadra, PA | July 23, 2012

Trips Combining Business & Pleasure

If a taxpayer combines business and pleasure in the same trip, the expenses for traveling to and from the destination are deductible only if the trip is primarily related to the business purpose. If the trip is primarily for pleasure, the expenses of traveling to and from the destination are not deductible, even though some business is conducted. The expenses allocable to the business conducted while at the destination, however, remain deductible.

Whether a trip is related primarily to business or is primarily for pleasure depends on the facts and circumstances, but an important factor is the amount of time spent on activities related to business or to pleasure. 

Example:
Mark travels from his home in Washington to Denver for business. He spends $900 on airfare, $300 on his hotel, and $150 on meals in Denver. After his four days of business are conducted, he rents a car for $120 and drives to a mountain camp and spends two days fishing. The camp charges him $200. Mark may deduct his airfare, meals (subject to the 50% limit), and lodging costs in Denver, but not the cost of the car or the fishing camp. His airfare is deductible in full, even though he took a personal side trip, because the primary purpose of his trip was business.

Spouse’s Travel Expenses
Travel expenses for a spouse, dependent, or other person accompanying a taxpayer (or an employee of the taxpayer) on business travel are not deductible unless the spouse, dependent, or other person is an employee of the taxpayer; the travel expense of the spouse, dependent, or other person is for a bona fide business purpose; and the expenses would otherwise be deductible by the spouse, dependent, or other person.

The prohibition does not apply to another person who may be a business associate whose travel is for a bona fide business purpose and whose expenses would otherwise be deductible. A business associate is one with whom the taxpayer could reasonably expect to engage with in business, such as an existing or prospective customer, client, supplier, employee, agent, partner, or professional advisor. To qualify as a bona fide business purpose, the presence of the spouse, dependent, or other person must be more than for the performance of some incidental service.

The prohibition specifically does not apply to expenses that would otherwise be deductible as moving expenses.

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