Planning a buisness vacation.

16 Replies

My wife and I have a mmllc for a duplex in iowa. Would my planned buisness trip qualify for tax reasons. We are trying to go to hawaii this coming May for a ten day trip. Would my plan qualify a buisness expence reguarding air fare, lodging, car rental, and dood on the days buisness is conducted. We are going to two different islands. One day of flying in, met with a realtor and look at some houses or raw land, for one day. Personal time next two days. Fly to second island one day, Next day meet with a realtor rinse and repeat, two days of relaxing then fly home. 10 days total, 3 days of flying 2 days of realtor meetings. Would that qualify as a buisness travel for a buy and hold llc. I would set up meeting with email correspondence before I book the flights. Thank you any input would be greatly appreciated.

Well, there's a difference between the technicality of conducting business and what the "appearance" of the trip may be to someone in the IRS sitting at a desk and looking over the file. I'm sure these kinds of trips are common and not sure how the IRS typically views them. I think "primary purpose" may play into this. Do you have a CPA or other tax advisor that is familiar with your business activities that you could run this by?

I agree with John and contacting your accountant is the way to go.  In general I would say as long as you're not expensing too many other things you're not going to get audited.  Whether you'll pass the audit test you need to discuss with a CPA for the best advice.

I don't know much about the Hawaiian market, but here in Miami there are some great investment and condotel programs that offer guaranteed returns but aren't as lucrative as what you're likely earning in Iowa, but they come with no headache.  If interested look up an agent in South Florida.

@Aaron Marx I think you are fooling yourself. Are you saying the primarily reason to go to Hawaii is for your business. You don't even make a good argument for that here. 

Ask your CPA. If he says yes consider a new CPA

@Aaron Marx

The proper treatment of these expenses should be the result of a deep conversation with your CPA.  Both to educate you and to flush out if there's any opportunity for favorable tax treatment.

If the majority of the trip was not business related, the travel expenses are not deductible, but other expenses may be.

For the Hawaii trip, I would want to know:

--Have you run ROI calcs on the type of properties you'll be looking at, and determined those type of properties are to be actively pursued?

--Have you had the realtor send you potential properties before the trip, ran ROI calcs on those properties, and pared them down to a short list?

--The big one...are you actually able to purchase a $300+ per sqft property in Hawaii at this point in your investment career?

--Have you documented all of the above?

That's playing the devil's advocate.  You can see how easily this could be ripped apart by the Service if one or more of the answers to the questions above is no...  Flying to Hawaii for a vacation and seeing a few properties on the fly with an agent doesn't make expenses deductible.

@Aaron Marx

I may want to consider the order of operations here (Also make sure you''re taking detailed notes and logs)

Day 1 - Fly in, Personal Time

Day 2- Meet up with a few brokers in the morning to discuss/drive the area (Have this setup ahead of time)/ Personal time

Day 3- Attend a real estate conference/REIA

Day 4- View houses for half a day, maybe put in a few offers / Personal Time

Day 5- Fly to new Island / Personal Time

Day 6- Repeat above

Day 7- Repeat above

Day 8- Repeat above

Day 9 - Personal time before departure

Day 10 - Leave

Originally posted by @Eamonn McElroy :

@Aaron Marx

The proper treatment of these expenses should be the result of a deep conversation with your CPA.  Both to educate you and to flush out if there's any opportunity for favorable tax treatment.

If the majority of the trip was not business related, the travel expenses are not deductible, but other expenses may be.

For the Hawaii trip, I would want to know:

--Have you run ROI calcs on the type of properties you'll be looking at, and determined those type of properties are to be actively pursued?

--Have you had the realtor send you potential properties before the trip, ran ROI calcs on those properties, and pared them down to a short list?

--The big one...are you actually able to purchase a $300+ per sqft property in Hawaii at this point in your investment career?

--Have you documented all of the above?

That's playing the devil's advocate.  You can see how easily this could be ripped apart by the Service if one or more of the answers to the questions above is no...  Flying to Hawaii for a vacation and seeing a few properties on the fly with an agent doesn't make expenses deductible.

 Even if he had documented everything and is legitimately looking for a property there - would you let him just deduct that trip in most instances if all he owned were properties in Iowa? (I thin that's where OP said) 

I would add that to the basis of a property purchased there. 

Traveling to look at properties isn't deductible unless you already have a "business" in that location. 

If you went to Hawaii for 10 days and there was a sat sun on the front end a week of REI bootcamp paid events that were 8 hours a day all week...then you can the weekend after for personal. MAYBE.

Taking vacations as a tax write off is a fairly aggressive move. It can also be a huge red flag. If your entire business is 2 SFH's already generating small losses and you write off a $8k vacation against that. It's going to raise a red flag.

The people you hear preaching these strategies are adding them into a business that is making much more. 

I have a client who made over $700k last year wholesaling, he paid over $30k on different education, coaching ect. Drop in the bucket. 

But when the IRS sees a brand new business with $400 of income pay $30k on coaching and educating. Ehhhhhh

@Natalie Kolodij

"Even if he had documented everything and is legitimately looking for a property there - would you let him just deduct that trip in most instances if all he owned were properties in Iowa?"

If bona fide, yes deductible.  Whether the expenses are deducted in year 1, or depreciated/amortized and deductible over a number of years was beyond the scope of my post and should be between the OP and his tax advisor.

Originally posted by @Eamonn McElroy :

@Natalie Kolodij

"Even if he had documented everything and is legitimately looking for a property there - would you let him just deduct that trip in most instances if all he owned were properties in Iowa?"

If bona fide, yes deductible.  Whether the expenses are deducted in year 1, or depreciated/amortized and deductible over a number of years was beyond the scope of my post and should be between the OP and his tax advisor.

 Yep just wanted to clarify for OP. 

That even IF deductible- it may not be all at once also.

@Aaron Marx

Here is a useful mental exercise. Imagine you have employees. Would you reimburse their Hawaii trip as a "business trip"? If not - we have a problem.

I do have the means to buy something out there. I did go 1500 miles from my residence to buy my duplex. So going out to Hawaii to look at something is not out of the ordinary. I was just under the impression that it could be written off if at least 50% of the time was done on travel or conducting buisness. Is not correct, as in not the rules set by the irs. If not please let me know as Im not hear to argue just simply learn. As I understand it, as long as 50% is travel to or from, or pre planned buisness meetings, confrences, ect. Like I said I could be wrong and would love to be set straight if so. Thanks again.

@Aaron Marx I would suggest you look up the Podcast or Blogs by @Amanda Han@Brandon Hall . I am pretty sure they both cover that in the Podcast(s) they have done.

IF I remember right and tieing in with what @Michael Plaks says above I would think it has a lot to do with how you plan it. It is also good that you have bought far from home and have the means to do a deal also.

If I had an employee I was sending to find properties and he was going to spend three days doing that and three days bumming I would expect to pay for his airfare, half the hotels, a rental car and food on the days he was conducting business. 

@Aaron Marx

It would be true if you already had a business in Hawaii. For a traditional business, it means a satellite office or a major customer in HI. For real estate, it means having properties there. 

Until you have a business/properties there, the trip cannot be deducted right away. It will have to be considered an additional cost of buying your first property there, whenever the purchase happens. The trip cost is then slowly deducted over many years.

Unless you listen to the likes of Grant Cardone who would make you believe you can deduct whatever you want. Especially his products.

Lol.. No i get it, Im not established there so until I am it is not considered a write off, unless I end up buying something during my trip then it can be, most likely over many years. Thank you for your time, I truly do appreciate it. I can take a buisness trip to Iowa and it would be.. Lol Not interested

Originally posted by @Aaron Marx :

I can take a buisness trip to Iowa and it would be.. Lol Not interested

Which is the exact reason these IRS rules exist. ;)

 

Thats where we disagree sir, the irs has those rules so they can extort as much money as possible from the average man. Screwing Americans since 1913 or 1861, take your pick. Thanks again.