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Subject Author Date
Foreign Busisness Expedition Travel Expenses Howard 04-26-2007
Posted by Howard on April 26, 2007, 2:11 am
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 My wife passed away in 2006 and our children have finished
college. My house is up for sale and early retirement starts
June 29th. I'd like run a business in a place that is warm
year round and English is the primary language. My oldest
son says Texas is the place to go, but I'd like to spend the
next 10 years outside the U.S. My first job out of college
required extensive foreign travel and I loved Brisbane,
Australia. So I've decided to take a trip there in July.

I expect to be there for most of the month of July and maybe
longer looking at three businesses a week via brokers and
finding some on my own. Most of the details are in place.
My tax guy just got back to me and questioned the
deductibility of some expected expenses (a per-diem for
lodging and meals). He also said the IRS might disallow the
all expenses if I did not buy or invest in a business while
there.

Opinions appreciated.

Howard

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Posted by Stuart A. Bronstein on April 28, 2007, 4:25 pm
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> I expect to be there for most of the month of July and maybe
> longer looking at three businesses a week via brokers and
> finding some on my own. Most of the details are in place.
> My tax guy just got back to me and questioned the
> deductibility of some expected expenses (a per-diem for
> lodging and meals). He also said the IRS might disallow the
> all expenses if I did not buy or invest in a business while
> there.

My guess is that none of your expenses to investigate work
will be currently deductible. Instead they would be
capitalized and written off after you actually get into
business.

If you are an artist or writer the answer might be different.

Stu

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Bill Brown on April 28, 2007, 4:25 pm
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<<SNIP>>

> lodging and meals). He also said the IRS might disallow the
> all expenses if I did not buy or invest in a business while
> there.

Your friend is wrong. There is no "might" about it. Such
expenses are not deductible if you don't buy or invest in a
business. Also, it is Congress, through the Internal Revenue
Code, that created this rule, not the IRS.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by jmail7 on April 28, 2007, 4:25 pm
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Here is a quotation from the Tax Court case Frank v.
Commissioner, 20 T.C. 511 (1954):

"The travel expenses and legal fees spent in searching for a
newspaper business with a view to purchasing the same cannot
be deducted under the provisions of [the predecessor to
section 162]. The [taxpayers] were not engaged in any trade
or business at the time the expenses were incurred. The
trips made by the taxpayers from Phoenix, Arizona, were not
related to the conduct of the business that they were then
engaged in but were preparatory to locating a business
venture of their own. The expenses of investigating and
looking for a new business and trips preparatory to entering
a business are not deductible as an ordinary and necessary
business expense incurred in carrying on a trade or
business. George C. Westervelt, 8 T. C. 1248. The word
"pursuit" in the statutory phrase "in pursuit of a trade or
business" is not used in the sense of "searching for" or
"following after", but in the sense of "in connection with"
or "in the course of" a trade or business. It presupposes an
existing business with which petitioner is connected."

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Stuart A. Bronstein on April 30, 2007, 11:22 am
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jmail7@andrewmitchel.com wrote:

> Here is a quotation from the Tax Court case Frank v.
> Commissioner, 20 T.C. 511 (1954):
>
> "The travel expenses and legal fees spent in searching for a
> newspaper business with a view to purchasing the same cannot
> be deducted under the provisions of [the predecessor to
> section 162]. The [taxpayers] were not engaged in any trade
> or business at the time the expenses were incurred. The
> trips made by the taxpayers from Phoenix, Arizona, were not
> related to the conduct of the business that they were then
> engaged in but were preparatory to locating a business
> venture of their own. The expenses of investigating and
> looking for a new business and trips preparatory to entering
> a business are not deductible as an ordinary and necessary
> business expense incurred in carrying on a trade or
> business.

But aren't preparatory expenses capitalized and depreciated?

Stu

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>

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