Air fare upgrade cost as business expenses?

Discussion in 'Tax' started by AES, Jul 27, 2005.

  1. AES

    AES Guest

    Retired professor/independent consultant, do a modest amount
    of consulting each year. At this stage in life (mid-70s),
    damned if I'll fly steerage class any more.

    If one of my client organizations by policy will only pay
    for coach class and I pay the difference for Business Class
    out of my own pocket, I trust that's a deductible business
    expense on my Schedule C . . . ???

    (Please don't tell me otherwise! -- or rather, tell me if
    you have to, but I won't welcome the news.)

    << ======================================================= >>
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    << and does NOT constitute legal OR professional advice. >>
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    AES, Jul 27, 2005
    #1
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  2. AES wrote:

    > Retired professor/independent consultant, do a modest amount
    > of consulting each year. At this stage in life (mid-70s),
    > damned if I'll fly steerage class any more.
    >
    > If one of my client organizations by policy will only pay
    > for coach class and I pay the difference for Business Class
    > out of my own pocket, I trust that's a deductible business
    > expense on my Schedule C . . . ???
    >
    > (Please don't tell me otherwise! -- or rather, tell me if
    > you have to, but I won't welcome the news.)


    I'm with you. When I fly I could go first class easily, AND
    btw, deduct it if business related.

    But I've got too much Scotch in me do do that. Well, what I
    mean is...... it's not happy hour; yet!

    ChEAr$,
    Harlan Lunsford, EA n LA

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Harlan Lunsford, Jul 28, 2005
    #2
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  3. ES <> wrote:

    > Retired professor/independent consultant, do a modest amount
    > of consulting each year. At this stage in life (mid-70s),
    > damned if I'll fly steerage class any more.
    >
    > If one of my client organizations by policy will only pay
    > for coach class and I pay the difference for Business Class
    > out of my own pocket, I trust that's a deductible business
    > expense on my Schedule C . . . ???
    >
    > (Please don't tell me otherwise! -- or rather, tell me if
    > you have to, but I won't welcome the news.)


    Well, I can't give you the legal answer since I am just
    another consultant, not a tax pro like some of the folks
    here. But my take is that the extra expense would be
    deductible as a business travel expense on your Schedule C.
    After all, some of your clients probably reimburse you for
    Business or First Class air travel, and the funds they use
    to reimburse you are deductible to them. If so, why should
    your own business not be able to deduct First or Business
    Class fare if you pay the whole thing, or the excess over
    what your client pays if they pay only for Coach?

    --
    Vic Roberts
    Replace xxx with vdr in e-mail address.

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Victor Roberts, Jul 28, 2005
    #3
  4. Victor Roberts at wrote:

    ....
    >> If one of my client organizations by policy will only pay
    >> for coach class and I pay the difference for Business Class
    >> out of my own pocket, I trust that's a deductible business
    >> expense on my Schedule C . . . ???


    The key criteria is whether this expense is "ordinary and
    necessary", assuming of course that you business makes a
    profit or intends to do so in the reasonable future. The
    only "luxury" travel that is limited is travel by ship. I
    would say take it as long as the trips are really for
    business.

    All freely provided advice guarantee correct or double your
    money back

    Frank S. Duke, Jr. CPA
    Cincinnati, OH USA

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Frank S. Duke, Jr., Jul 30, 2005
    #4
  5. "Frank S. Duke, Jr." <> wrote:
    > Victor Roberts at wrote:


    > ...
    >>> If one of my client organizations by policy will only pay
    >>> for coach class and I pay the difference for Business Class
    >>> out of my own pocket, I trust that's a deductible business
    >>> expense on my Schedule C . . . ???


    > The key criteria is whether this expense is "ordinary and
    > necessary", assuming of course that you business makes a
    > profit or intends to do so in the reasonable future. The
    > only "luxury" travel that is limited is travel by ship. I
    > would say take it as long as the trips are really for
    > business.


    There was never any question in my mind that we were talking
    about real business travel. I travel a fair amount in my
    business as none of my clients are local. My clients always
    pay for Business Class on trips to Europe and Asia. I could
    not go to work as soon as I arrived if I had to fly in
    coach. I live on the east coast and trips to California are
    often First Class, but most often full fare coach upgraded
    at no cost to First.

    --
    Vic Roberts
    Replace xxx with vdr in e-mail address.

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Victor Roberts, Aug 1, 2005
    #5
  6. AES

    Steve Pope Guest

    Victor Roberts <> wrote:

    > I travel a fair amount in my
    > business as none of my clients are local. My clients always
    > pay for Business Class on trips to Europe and Asia. I could
    > not go to work as soon as I arrived if I had to fly in
    > coach. I live on the east coast and trips to California are
    > often First Class, but most often full fare coach upgraded
    > at no cost to First.


    On your schedule C, report what your client reimburses
    you for travel as revenue, and report the full cost of
    the travel as an expesne. These two numbers do not have
    to be related in any particular way but they both have
    to be reported.

    Tax rules regarding business travel deviate significantly
    from most company reimbursement policies. For example,
    meals consumed during non-overnight business travel
    cannot be an expense on your schedule C, but most companies
    reimburse them -- so that counts as income.

    Steve

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Steve Pope, Aug 2, 2005
    #6
  7. AES wrote:

    > Retired professor/independent consultant, do a modest amount
    > of consulting each year. At this stage in life (mid-70s),
    > damned if I'll fly steerage class any more.
    >
    > If one of my client organizations by policy will only pay
    > for coach class and I pay the difference for Business Class
    > out of my own pocket, I trust that's a deductible business
    > expense on my Schedule C . . . ???
    >
    > (Please don't tell me otherwise! -- or rather, tell me if
    > you have to, but I won't welcome the news.)


    To be deductible, expenses must meet two requirements: a)
    they must be ordinary and necessary, and b) they must not be
    lavish or extravagant.

    I see no problem with the ordinary and necessary
    requirement. If the client is located in another city, you
    obviously must travel to that city.

    I doubt if there would be much question about lavish or
    extravagant, either, although it could be an issue. This is
    one of those "facts and circumstances" situations that
    depend on the specific case. Time and distance traveled
    could be factors. Also, the amount of the fee to be earned
    in relation to the travel costs might influence a revenue
    agent.

    For example, if the client won't reimburse more than coach
    fare and the upgrade costs as much, or nearly as much, as
    the fee to be paid, it could be considered extravagant.

    On the other hand, if you're built like a 300 pound football
    guard, you may have to fly in business or first class.

    Lanny K. Williams, CPA
    Nawarat, Williams & Co., Ltd.
    Income Tax Services for Expatriate Americans

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Lanny K Williams CPA, Aug 2, 2005
    #7
  8. (Steve Pope) wrote:
    > Victor Roberts <> wrote:


    >> I travel a fair amount in my
    >> business as none of my clients are local. My clients always
    >> pay for Business Class on trips to Europe and Asia. I could
    >> not go to work as soon as I arrived if I had to fly in
    >> coach. I live on the east coast and trips to California are
    >> often First Class, but most often full fare coach upgraded
    >> at no cost to First.


    > On your schedule C, report what your client reimburses
    > you for travel as revenue, and report the full cost of
    > the travel as an expesne. These two numbers do not have
    > to be related in any particular way but they both have
    > to be reported.
    >
    > Tax rules regarding business travel deviate significantly
    > from most company reimbursement policies. For example,
    > meals consumed during non-overnight business travel
    > cannot be an expense on your schedule C, but most companies
    > reimburse them -- so that counts as income.


    I'm now a C Corp so I don't use Schedule C.

    However, on the question of meals - I have two meal
    categories. One is reimbursed meals and the other is
    unreimbursed meals. Unreimbursed meals include meals for
    overnight trips that I pay for myself - for example to
    attend professional conferences. Reimbursed meals are meals
    that are reimbursed by my clients for overnight trips.

    I file detailed expense accounts with a clients that break
    out the actual cost of meals and other expenses. They then
    reimburse me for my travel per the submitted expense
    account. In this manner the funds received for reimbursed
    meals are deductible at 100% instead of 50%.

    I usually don't do non-overnight trips.

    --
    Vic Roberts
    Replace xxx with vdr in e-mail address.

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Victor Roberts, Aug 4, 2005
    #8
  9. AES

    Steve Pope Guest

    Lanny K Williams CPA <> wrote:

    > For example, if the client won't reimburse more than coach
    > fare and the upgrade costs as much, or nearly as much, as
    > the fee to be paid, it could be considered extravagant.


    Hmm. I don't see whether the client reimburses it figuring
    into whether it's a valid business expense. Usually, I
    do not bill my clients for travel costs yet I enter them
    on my Schedule C.

    Steve

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Steve Pope, Aug 4, 2005
    #9
  10. (Steve Pope) wrote:
    > Lanny K Williams CPA <> wrote:


    >> For example, if the client won't reimburse more than coach
    >> fare and the upgrade costs as much, or nearly as much, as
    >> the fee to be paid, it could be considered extravagant.


    > Hmm. I don't see whether the client reimburses it figuring
    > into whether it's a valid business expense. Usually, I
    > do not bill my clients for travel costs yet I enter them
    > on my Schedule C.


    If you spent $1000 on a airline ticket, you wouldn't bill
    that to your client? Either your clients are all local or
    you charge very high rates :)

    --
    Vic Roberts
    Replace xxx with vdr in e-mail address.

    << ======================================================= >>
    << The foregoing is intended for educational purposes only >>
    << and does NOT constitute legal OR professional advice. >>
    << >>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org. >>
    << Copyright (2005) - All rights reserved. >>
    << ======================================================= >>
     
    Victor Roberts, Aug 5, 2005
    #10
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