20.13 Deducting Expenses of Business Conventions

Conventions and seminars at resort areas usually combine business with pleasure. Therefore, the IRS scrutinizes deductions claimed for attending a business convention where opportunities exist for vacationing. Especially questioned are trips where you are accompanied by your spouse and other members of your family. Deducting expenses of foreign conventions is subject to restrictions (20.15).

Generally, you may not deduct expenses of attending investment conventions and seminars (19.15). You also may not deduct the costs of business conventions or seminars where you merely receive a videotape of business lectures to be viewed at your convenience and no other business-related activities occur during the event.

In claiming a deduction for convention expenses, be prepared to show that your attendance at the convention benefitted your business. Cases and IRS rulings have upheld deductions for doctors, lawyers, and dentists attending professional conventions. One case allowed a deduction to a legal secretary for her costs at a secretaries’ convention. If you are a delegate to a business convention, make sure you prove you attended to serve primarily your own business interests, not those of the association. However, it is not necessary for you to show that the convention dealt specifically with your job. It is sufficient that attendance at the convention may advance or benefit your position. If you fail to prove business purpose, the IRS will allocate your expenses between the time spent on your business and the time spent as a delegate. You then deduct only the expenses attributed to your business activities.

EXAMPLES
1. An attorney with a general law practice was interested in international law and relations. He was appointed a delegate to represent the American branch of the International Law Association at a convention in Paris. The attorney deducted the cost of the trip and convention as business expenses which the IRS and a court disallowed. He failed to prove that attending the conference on international law helped his general practice. He did not get any business referrals as a result of his attendance at the convention. Nor did he prove the chance of getting any potential business from the conference.
2. An insurance agent doing business in Texas attended his company’s convention in New York. One morning of the six-day convention was devoted to a business meeting and luncheon; the rest of the time was spent in sightseeing and entertainment. The company paid for the cost of the trip. The IRS added the reimbursement to the agent’s pay and would not let him deduct the amount. The convention in New York served no business purpose. It was merely a method of entertaining company personnel. If there was any valid business to be transacted, the company could have called a meeting in Texas, the area of his home office.
3. A plywood company could not deduct the costs of entertaining 116 customers and employees at a New Orleans hotel during a Superbowl weekend. The company did not reserve conference rooms or make any other arrangements for organized business meetings. The IRS and two federal courts held that although business discussions may have occurred on a random basis, these were secondary to entertainment.

What expenses are deductible?

If the convention trip is primarily for business, you may deduct travel costs both to and from the convention, food costs, tips, display expenses (such as sample room costs), and hotel bills. If you entertain business clients or customers, you may deduct these amounts too.

Food and beverage costs are subject to the 50% cost limitation rule (20.25).

- - - - - - - - - -
image Caution
Substantiate Convention Business
Keep a copy of the convention program and a record of the business sessions you attend. If the convention provides a sign-in book, sign it. In addition, keep a record of all of your business expenses (20.27).
- - - - - - - - - -
EXAMPLE
You attend a business convention held in a coastal resort city primarily for business reasons. During the convention period, you do some local sightseeing, social entertaining, and visiting—all unrelated to your business. You may deduct your traveling expenses to and from the resort, your living expenses at the resort, and other expenses such as business entertaining, sample displays, etc. But you may not deduct the cost of sightseeing, personal entertaining, and social visiting.

Keep records of your payments identifying expenses directly connected with your business dealings at the convention and those that are part of your personal activity, such as sightseeing, social visiting, and entertaining. Recreation costs are not deductible even though a part of your overall convention costs.

Fraternal organizations.

You may not deduct expenses at conventions held by fraternal organizations, such as the American Legion, Shriners, etc., even though incidental business was carried on. However, delegates to fraternal conventions may in some instances deduct expenses as charitable contributions (14.4).

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset
3.144.244.250