Luna , a self-employed engineer, flew from New York to Paris, France primarily for a business...

Luna , a self-employed engineer, flew from New York to Paris, France primarily for a business meeting. She departed on Sunday, conducted business on Monday through Friday, shopped and visited local sights on Saturday and Sunday, concluded her business on Monday, visited local sights on Tuesday through Friday, and returned home on Saturday. With respect to the cost of the plane fare for the trip, Luna should:

		Deduct the entire fare.
		Prorate the fare equally between business and personal activities and deduct the business portion.
		Prorate the fare based on the time devoted to business and personal activities and deduct the business portion.
		Deduct none of the fare.

Solutions

Expert Solution

The correct answer is "Prorate the fare based on the time devoted to business and personal activities and deduct the business portion."

See the following IRS rule about combining business and personal activities in travelling to a foreign country:

Time spent for personal purposes could trigger allocation, if you spend part of your time in a foreign country engaging in personal activities. The rule about having to allocate your travel expenses in proportion to the number of days you spent on non-business activities during your trip gets triggered, unless you were outside the U.S. for a week or less, or if you were outside the U.S. for more than a week but you spent less than 25 percent of the total time on personal activities (counting both the day your personal trip began and the day it ended), For the purpose of this rule, a week is seven consecutive days - not counting the day you leave the U.S., but counting the day you return to the U.S. from a trip combining business and personal activities.

As per this rule, Luna was in a foreign country for 13 consecutive days. Her business trip concluded on Monday of the second week. She spent 5 days purely on personal trips counting both Tuesday when the personal trips began and Friday when they ended which is more than 25% of the total days. Hence, as per both the criteria, Luna is under an obligation to allocate her travel expenses in proportion to the number of days she spent on non-business activities during her trip and deduct the business portion only,

ekkarill92 answered 1 year ago

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