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When taking business deductions on a tax return, it is important that you know the sometimes-complicated rules. One couple learned this lesson the hard way.
Marlene Robinson was employed as the general manager for Influence Marketing, a wholly owned subsidiary of QVC, Inc. As general manager, she was in charge of two operations – one near her home in Pennsylvania and one at the Mall of America in Minnesota. Both operations are retail locations and also attract tourists. Robinson was responsible for the profitability of both locations and had control over "strategic initiatives."
To look for ideas or business opportunities that might benefit her employer, Robinson testified in court that she conducted benchmarking studies. These efforts had to be conducted on her personal time, and her employer did not reimburse the costs. Robinson deducted the cost of her benchmarking efforts as an unreimbursed employee business expense.
Robinson's benchmarking efforts included trips to Disneyland in Anaheim, Calif., and Disney World in Orlando, Fla. Robinson explained that she makes an annual trip to Disney World to "see what's going on." While there, she visits all of the theme parks to compare the newest tourist attractions and look at Disney's retail establishments.
Robinson took these trips accompanied by her husband and their daughter. On at least one of the trips, they were also accompanied by her mother and her husband's mother. She claimed that all of the expenses from those trips were unreimbursed employee business expenses because they were important "benchmarking" excursions for her job.
The court noted that, if a trip is primarily personal, expenses are not deductible even if you engage in some business activities at the destination. The amount of time spent on personal activity during the trip compared with the amount of time spent on activities directly related to your business is an important factor in determining whether the trip is primarily personal.
The court found that the facts suggested that the primary purpose of Robinson's trips was personal pleasure. She was always accompanied by other family members, and she used vacation time to make the trips. The fact that Robinson may have garnered some business ideas on her visits to tourist attractions did not convince the court to allow her deduction.
With apologies to Paul Simon:
And here's to you, Mrs. Robinson
Mickey has a place for you to stay.
Hey hey hey!
The court was not finished with the Robinsons, however. The husband, Donald Robinson, a teacher of criminal justice, claimed business deductions for:
* A subscription for People magazine (It contained articles on current events.)
* Purchases of books on midwifery (He sometimes taught classes on ethics.)
* Purchases of books about Frank Lloyd Wright (The architect had been involved in a crime.)
The court denied Mr. Robinson's deductions, too. (Robinson v. Commissioner, TC Memo 2011-99, May 5, 2011)
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