Question

Teresa, a sales consultant, travels from Ohio to California for business, paying $380 for airfare. She then spends $330 on lodging and $150 on meals for the business portion of the trip. While there, she goes on a personal sightseeing tour of Mount Lancaster and spends $400 on car rental and lodging and $85 on meals.

Refer back to your readings and evaluate the scenario above. Respond to the prompts below for your initial post.  

• Decide what Teresa can deduct for business travel and explain your reasoning.
• Explain what factors must be considered.
• How would your answer change if the trip was outside of the US? Explain.
• Complete the calculation for Teresa’s deduction and share your results.

Answer 1

IRS Publication 463 have following guidance :

Travel expenses are the ordinary and necessary expenses of traveling away from home for your business

An ordinary expense is one that is common and accepted in your trade or business.

A necessary expense is one that is helpful and appropriate for your business.

Business travel is travel which is "substantially longer than an ordinary day's work" and that requires you to sleep or rest while away from home.

Questions

A. Decide what Teresa can deduct for business travel and explain your reasoning.

Teresa can deduct : 785=380 (Aire fare) + 330(lodging)+75 (150*50% for meals)

Note : The expense incurred personal sightseeing while travelling within US is not deductibel since they are not incurred for business purpose

B. Explain what factors must be considered.

The expense should be ordinary and necessary for the business.

Note : The expense incurred personal sightseeing while travelling within US is not deductibel since they are not incurred for business purpose

C.How would your answer change if the trip was outside of the US? Explain.

For travelling outside US, all travel expenses of getting to and from your business destination is deductible if trip is entirely for business

A trip is considered entirely for business when

a. Travel & spend time entirely for business.

b. No substantial control on travel -- so though you dont spend entire time on business acitvities however as you are employee who is getting reimbursement than it can be treated as entirely for business purpose

c. Outside United States no more than a week.

Based on detail provided it appears that the travel outside US is not more than a week and hence it can be said to be entirely for business purpose and accordingly all expense incurred will be business expense subject to meal expense is 50% deductible :

1,227.50 =785+400+85*50