It's no secret that convention planners time their meeting to coincide with the universal urge to "get away" during the late summer and early fall. Planned properly, convention attendees, in addition to building professional ties and gaining valuable business or professional information, can also enjoy a "mini-vacation" while deducting at least some of the expenses. Likewise, non-convention business travel can generate similar deductible expenses while yielding the traveler some rest and recreation. Now is the time to remind clients of the legitimate deductions to which they are entitled, as well as to warn them of the expenses they cannot deduct.     

Combined Business and Personal Travel

Taxpayers are allowed a deduction for travel expenses while away from home in pursuit of trade or business. The expenses, which include transportation, fares, meals, lodging and incidental expenses, are deductible of they are not lavish or extravagant. A taxpayer who travels to a destination and, while there, engages in both business and personal activities may deduct he entire amount of transportation expenses to and from the destination, but only if the trip is primarily related to his trade or business. Lodging costs and 50% of meals while on business are also deductible. Any reimbursement under an accountable plan is received tax-free by the traveler.

Business Relationship

Expenses of attending a convention may be deductible both for self-employed persons and employees, provided there is a sufficient business relationship between the taxpayer's trade or business and his attendance at the convention. To be deductible, the taxpayer's attendance should be such that it advances or benefits the taxpayer's trade or business.

Example: Taxpayer is a CPA specializing in international tax. He attends a conference on subpart F and controlled foreign corporations. He may deduct the expenses of attending the conference, since the topic matter is directly related to his field of international tax.

Example: Taxpayer is an attorney with a local real estate practice. She attends a conference on the law of the sea. She may not deduct the expenses of attending the conference since she cannot show any actual or potential business benefit that might result from her attendance.

Foreign Conventions

If the convention, seminar, or meeting is held outside the North American area, the costs of attending are not deductible unless it is directly related to the active conduct of the taxpayer's trade or business and it is as reasonable to be held outside the North American area as within the North American area.

Comment: This is a higher standard than the standard generally applied to conventions. Under the general rules, the taxpayer may meet the business relationship test by showing that the taxpayer's business duties and responsibilities tie into the program or agenda of the meeting and the agenda does not have to deal specifically with the taxpayer's official duties and responsibilities.

Factors that are relevant to the reasonableness of the meeting being held outside the North American area include the meeting's purpose and activities, the sponsor's purpose and activities, the residence of the organization's active members, and the location of past and future meetings.

Cruise Ship

Conventions on cruise ships are subject to special rules for deductibility:

• The meeting must be directly related to the active conduct of the taxpayer's trade or business
• The cruise ship must be a vessel registered in the United States
• All ports of call must be located in the United States or its possessions

The taxpayer also has to satisfy rigorous reporting requirements to qualify for the deduction. These include written statements providing specific information by both the attendee and an officer of the sponsoring organization or group. In addition, the taxpayer is limited to a maximum annual deduction of $2,000 for cruise ship expenses, regardless of how many cruises are involved and whether the taxpayer files a separate return or joint return.

Investment Seminars

Although taxpayers are allowed a deduction for ordinary and necessary expenses paid for the production or collection of income, a special rule prohibits a taxpayer from deducting any costs of attending conventions, seminars, or similar meetings for investment purposes. Expenses that are disallowed include travel to the site of the convention, registration or other fees for attending the convention, and meals, lodging, and local travel expenses while attending the convention.

Weekend Straddles and Stayovers

If a taxpayer's business would otherwise keep him away over the weekend, but he flies home to be with his family, he can deduct his travel expenses, including meals and lodging, up to the amount he would have spent on meals and lodging had he remained away. He must, however, check out of his lodging when he leaves for the weekend, and reregister when he returns. If he keeps his hotel room during his visit home, his deduction for the airfare home is limited to what he would have spent for meals had he stayed at the hotel.

Some employers require or encourage their employees to stay over Saturday night even though business is concluded on Friday, since the lower air fares involving a Saturday night stay more than make up for the additional lodging expense. The expenses in such cases for the additional lodging and meals are deductible as ordinary and necessary business expenses.

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