Chapter 8 - Employee Expenses Independent Contractor v. Employee Miscellaneous Itemized Deductions - 2% limit Meals and Entertainment - Substantiation - history: 0% disallowance, 20% disallowance, 50% disallowance (effective 1994)

Interstate truckers, airline employees, merchant marines, RR workers, bus drivers (interstate Starting 1998: increase % allowed of meals 5% every 2 yrs to 80% by 2008

Substantiation IRC 274: Amount, time and place, business purpose, business relationship - Diary and Doc - Doc if lodging or other > 75 (10/1/95) Travel, ent, bus, gifts, listed prop Accountable Plans - Requirements, substantiation, return excess, deemed substantiation Nonaccountable plans:W-2 and unreimbursed treatment

Local Transportation Not travel away from home Not commuting Actual v. standard mileage36.0 (2003) Occasionally

Travel away from home (overnight) Temporary v. indefinite Conventions (dir. Rel’d), travel as educat (no) U.S. combined business and pleasure travel - prim bus: all air, travel days = bus Foreign travel - alloc bus/pleas on air unless 7 days or less or <25% pers; or no allocat if no substan control arrans or vac not major factor; (travel days = bus)

Moving Expenses Distance and time tests - Classification of expenses - (Form 3903) A. Transportation of goods B. Expenses of moving self and family - travel, lodging, but no meals Mileage: 12 cents (2003)

Effective 94 - A+B only, no meals, above line; reimbs of deductible = excluded = chap 4 mileage

Education Expenses Tests: Maintain or improve skills or meet express reqs of ER v. meet min stand to qualify for new T or B Suspended participation

Entertainment Expenses 50% disallowance,(effective 1994) - Substantiation; meals; entertainment - directly related, associated with: >50% dir & assoc Business gifts - deductibility - $25 per dee per yr (unless) Club dues no longer deductible (e.g., country club) (effective 1994) - pub serv clubs OK (e.g. Kiwanis, Rotary, Lions)

Home Office Exclusive and regular use - principal place of bus or used by clients/patients/customers or separate structure + Employees - convenience of employer Limited to income - CF loss - yes - 280A vac home and home office; no 183-hobby Misc itemized subj to 2% if EE Soliman - relative importance, time spent New Law Repealed Soliman

Repeal of Soliman (97 Law) 280A “Prin Place of Bus” - includes used for adm & man bus activs if no other fixed locat for substan adm & man By 3p, not deny (at another locat) OK: 1) adm & man at another locat by TP not substan 2) substan non adm & man at another locat by TP (e.g. client mtgs)

IRA’s Misc EE exps –clothing - special req’d, not fit for ord wear; union dues, prof exps, mtgs, job skg (not 1st job, not new T or B), pubs, etc