Ways to write off prospecting trips

4 Replies

Hello,

I am looking for strategies to write off trips to some areas I'd like to invest in.

I know that when you own a place you rent out, as an individual, you can write off the trip when you go check it out.

Is there anything that can be done when you are in a prospecting time ? Should I create some kind of investment LLC and put the airfare as expense?

Appreciate your ideas and strategies.

Thanks.

Charles

@Charles H.

If your activities rise to the level of a 'trade or business', a general non-specific search in a new geographic area would be start up expenses under IRC Sec 195.

Once you've identified a specific property, expenses are capitalized and added to the property's basis if acquired.

Expensing the costs, even through an active LLC/ "investment LLC" is not correct treatment and will get adjusted should the IRS ever audit you.

Encourage you to work with your tax CPA/EA as it's very possible not all of the travel expenses are 100% business related.

@Charles H.

@Eamonn McElroy is correct in that the costs to look for new properties is not currently expensed and instead would be added to the cost basis of the new property you purchase.

There were taxpayers who took your position where the IRS adjusted their return that is documented in various court cases.

@Basit Siddiqi   @Eamonn McElroy I appreciate your time to answer.

Could you help to in understanding how to document the expenses to have it on the property basis ?

Let say I want to travel from Savannah GA to Salt Lake City to visit something and it doesn't work. Then I found something out of luck next door. How do I add the travel expense and due dilligence (if any) from the Salt Lake City travel ? Is it just showing proof/documentation to a CPA ?

Thanks again for your help guys.