In his autobiography, Sam Walton, founder of Wal-mart, admitted that on many family vacations, he would take side trips along the way to visit competitor discount stores to pick up new ideas.   Moreover, once at their vacation destination, he would often slip away from the family early in the morning to again check out the competition in the area.   Did this activity make the trip a tax deductible travel expense?   The IRS would say it depends on whether the trip was primarily business or personal.   The final answer would probably vary depending on whether they asked Sam or his family.

What if Sam was traveling to a convention or seminar?   What if he was traveling to the annual stockholder's meeting or a quarterly business retreat or a business event on a cruise ship?   Would these trips be tax deductible?   What are the relevant IRS regulations?   And most importantly, what are the documentation requirements to protect your deduction?   This article will address these questions as part of our continuing series on "How To Deduct Your Lifestyle."

How To Deduct Travel

To enhance sales and grow your business, out-of-town travel may be necessary.   You will need to attend conferences and seminars to update your knowledge and skills.   You may want to sell your products or services to out-of-town prospects, customers, family or friends. The cost of this travel includes airplane tickets, hotels, car rental and overnight incidentals.   These costs are tax deductible if properly documented.

By using a sound documentation system (credit card statements, canceled checks, daytimers, etc.), you can track your expenses.   Out-of-town travel however, also requires that you prepare a summary report of the trip.   Who did you meet with?   When did you meet and where?   What business was discussed and what was the result?   Attach copies of the conference brochure, business cards, etc.   I recommend a separate file for each trip.

Annual Meetings/Business Retreats

Fortune 500 companies are famous for conducting annual stockholder's meetings at vacation resorts, such as Orlando, Las Vegas or San Diego.   Your privately held company is also entitled to an annual stockholder's meeting in similar locations.

At the beginning of the year or at mid-year, business retreats are important to company growth and employee morale. Be sure to keep the minutes of the strategy sessions and any follow up action. The written business agenda for a four day weekend retreat in Destin, New Orleans or Corpus Christi, could include business meals, entertainment and golf with the management team.   And Uncle Sam may pick up 30% of the tab as a tax write off.

Cruise for Success

Carnival and Royal Caribbean cruise lines are now leaving from New Orleans for Western Caribbean ports of call.   Rates are reasonable and business travel opportunities are also available. Attend a business seminar or coordinate your own employee or customer-based seminar.   The cruise line will assist with the set up and group discounts are offered.

IRS regulations regarding business conventions or seminars on cruise ships are summarized as follows:

•  The meeting must be directly related to the active conduct of the trade or business.

•  All ports of call of such cruise ship are located in the United States or in its possessions.   With respect to cruises beginning in any calendar year, not more than $2,000 of the expenses attributable to an individual attending one or more meetings may be taken into account.

•  The taxpayer claiming the deduction must attach additional information to the tax return to document business vs. personal time.

Conclusion

Business travel is deductible if you can demonstrate and document that the primary purpose of the trip was business.   As mentioned in my previous articles, today's busy executives and business owners often find it difficult to distinguish between business and leisure lifestyles - just like Sam Walton.