Tax deductibility for business client use?

[KJG]

I have several clients that I would like to send down for a couple of nights. Has any one used their points for this and how have you deducted it as a business expense?

And if "yes" have you been challenged by the IRS and what was the outcome?

Since the points have a market rental value of ~ $10/point would this be your deduction or would you use what Disney charges a standard guest or is it the actual cost of yearly dues plus portion of up frount cost or ect....

 

[Wislodgers]

When we spoke with our accountant about a business trip to Florida(staying DVC), he stated that since no receipt with a monetary amount would be given for the room, it could not be deducted. Anyone else have any ideas?

 

[KJG]

I deduct charitable items with an educated guess of value. This should not be any different it is just a matter of how you arrive at the number and if the IRS follows your logic. So I am looking for some good logical ways or better yet some logical way that has been tested by the almighty.

 

[PamOKW]

I'm sure there are greater tax minds that may weigh in on this subject....But, I'm not sure that you could take a business deduction unless you purchased the points to use solely for business purposes. I don't know if you can mix business and pleasure use of the points. I may be wrong on that thinking. A comparison might be....If you own a beach cottage and allow a business associate to use it, can you deduct the cost of their week? I don't know the answer but the yes/no to that would be a starting point for determining what would be allowed with DVC.

 

[Doctor P]

This is a much more complex issue than one might think, as Pam has suggested. You need to deal with a trustworthy tax adviser on this one.

 

[Dean]

My guess is there is no deductibility. BTW, there is no deduction if you donate time at a timeshare or condo, only if you give them the ownership.

 

[RobDoc]

If you personally own the DVC membership, you may be able to have the business rent the accommodations from yourself. You can charge a fair market value for the accommodations. Provide a receipt to the business for the rental.

I would still run this issue past your tax advisor before assuming anything. That way you can create a scenario which may satisfy any IRS requirements.

Good Luck!

 

[KJG]

Doc your on the right track. I currently have a rental leasing company. My best client is myself. I simply did this because both business due quite different things. I actually bill myself, sign leases with myself, and complain to myself. Both of them have different taxes filed.

But in that case I must charge myself and treat myself, as I was just any other business and charge the going rate.

So back to my original questions what can be considered to be the average going rate?

1. Ten dollars a point?
2. The charge Disney would charge a person off the street?
3. My cost basis divided by my remaining years plus yearly fees then multiply that total by the % points of my total that I used for my clients stay.
4. Ect...........

Then of course you would have Enron and Arthur Andersons way of doing it, which would take to long to explain.

 

[dwg]

I do not believe that sending clients to Disney world would qualify as a business deduction.

In order to qualify as a business deduction the expenses must be substantiated as to (1) amount, (2) time and place , (3) and business purpose of the trip. Any trip in the format that you are considering would likely fail the business purpose test. Additionally even if there was a business purpose no deduction is allowed for the spouse, dependent , or other indivudual who has no direct busienss relationship.

In regards to the business renting the points from you, this would most likely be looked upon as nothing more than a way for the busienss to pay your personal expenses and would be disallowed as a deduction. In any case, even if your argument that the rental of the points by the business is legitimate, you would be required to report the amount of the rental fee as additional income on your return. Also depending upon how the business is structured you could be required to report the rental payments as income even if the busienss deduction is disallowed.

The bottom line is that you should consult with a reliable tax accountant before considering any type of deduction of this nature, as the consiquences of the IRS disallowing the deductionat at a later date could cost much more than any tax savings that might be received by what at best would be considered a dubious deduction in the first place.

 

[KJG]

Well Put!

Thanks for all your thought's.