Tax Tip Podcast for Real Estate Professionals – Travel to Conventions

Generally, the expenses of attending a convention are deductible if the general requirements for the deduction of travel expenses are otherwise met. However, there are special limitations that apply to conventions held outside of North America and conventions held on cruise ships.

A taxpayer (includes Realtors, Brokers, and Real Estate Professionals) can deduct the expenses of attending a convention, seminar, or similar meeting held outside of North America only if the meeting is directly related to his trade or business and it is as reasonable to hold the convention outside of North America as it is to hold the convention in North America. The factors taken into account in determining the reasonableness of the location include the purpose and activities of the meeting, the purpose and activities of the sponsoring organization, the homes of active members of the organization, and the locations of other meetings of the organization (Code Section 274(h)(1); Revenue Ruling 63-266).

For purposes of determining whether deductions are allowed for expenses incurred in connection with a convention, Revenue Ruling 2016-16 provides that the following areas are included in North America:

1. The 50 states of the United States and the District of Columbia;
2. The possessions of the United States, which for this purpose are American Samoa, Baker Island, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, Howland Island, Jarvis Island, Johnston Island, Kingman Reef, the Midway Islands, Palmyra Atoll, the U.S. Virgin Islands, Wake Island, and other United States islands, cays, and reefs not part of the 50 states or the District of Columbia;
3. Canada;
4. Mexico;
5. The Republic of the Marshall Islands;
6. The Federated States of Micronesia; and
7. The Republic of Palau.

The following areas are also included in the North American area for expenses incurred in attending a convention that began after the date noted in parentheses:

1. Antigua and Barbuda (February 9, 2003);
2. Aruba (September 12, 2004);
3. Bahamas (December 31, 2005);
4. Barbados (November 2, 1984);
5. Bermuda (December 1, 1988);
6. Costa Rica (February 11, 1991);
7. Cura (December 22, 2013);
8. Dominica (May 8, 1988);
9. Dominican Republic (October 11, 1989);
10. Grenada (July 12, 1987);
11. Guyana (August 26, 1992)
12. Honduras (October 9, 1991);
13. Jamaica (December 17, 1986);
14. Panama (April 18, 2011);
15. Saint Lucia (May 4, 2014); and
16. Trinidad and Tobago (February 8, 1990).

For conventions in Sint Maarten, Bonaire, Sint Eustatius, or Saba during the period (or with respect to which the taxpayer demonstrates a nonrefundable contractual obligation existed during the period) from October 10, 2010, through June 27, 2016, certain transition relief as described in Revenue Ruling 2016-16 applies.

A taxpayer (includes Realtors, Brokers, and Real Estate Professionals) can deduct the expenses of attending a convention, seminar, or similar meeting on a cruise ship only if the meeting is directly related to his trade or business, the cruise ship is registered in the U.S., all ports of call for the cruise ship are located in the United States or a U.S. possession, and the taxpayer attaches certain written statements regarding the meeting to his tax return (Code Section 274(h)(2) and (5)).

Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.

DON FITCH, CPA
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Palm Desert, CA 92260

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(Updated 03/16/2021 08:05)