Don't HR Alone # 36 - Personnel Files, Travel Expenses, and Eating Disorders

CEO’s sightseeing in Spain may be deductible

Q The CEO of your corporation has decided that it is necessary for her to travel to Spain for two weeks in order to meet with prospective buyers and look over some potential corporate office sites. While she is there, she plans to spend five days shopping, watching bullfights, and going to the beach. Since most of her time away will be for business purposes, can she deduct the cost of her travel expenses? If an assistant buyer travels with her, can that person also deduct the costs of the trip?

A Possibly. An individual can deduct the cost of travel expenses incurred outside the United States only if the trip is primarily for business purposes. Travel costs must be allocated between nondeductible personal expenses and business expenses unless the time spent traveling outside the United States is one week or less or the time spent for personal purposes is less than 25 percent of the total time spent away from home. Also, allocation is not necessary if an employee spends less than 25% of her time outside the U.S. on personal activities. So, at first glance, it would appear that the trip cannot be deducted. (Allocation is not required for domestic travel, by the way).

There are exceptions to this rule, however. For example, no allocation for traveling costs to and from a destination would be necessary if a traveling employee is not related to his employer and is not a managing executive. This would be good news for the assistant buyer, but, since a managing executive is any employee who, by reason of his authority and responsibility, is authorized to decide upon the necessity of his business trip without being subject to an effective veto procedure, it is unlikely the CEO would fit into this category.