$1,600 in value if awarded according to a qualifi ed plan award where the average gift does not exceed $400.
20. Transportation expenses are defi ned for tax purposes as the costs of transporting an employee from
one location to another when the employee is not away from home overnight for business purposes.
Transportation expenses include the cost of airfares, taxi fares, automobile expenses, parking fees, and
turnpike tolls, etc.
21. Travel expenses are defi ned for tax purposes as costs incurred while away from home in the pursuit of a
trade or business including employment activities of an employee. The IRS has interpreted the term “away
from home” to mean “away from home overnight.” Overnight does not mean a full 24-hour period but a
period substantially longer than a normal work day where it would be reasonable for an employee to need
sleep or rest to meet normal job requirements. The IRS also takes the position that a taxpayer’s home,
for purposes of “away from home” travel expenses, is at the location of the taxpayer’s principal place of
business or employment and not at the location of the taxpayer’s personal residence.
22. An entertainment expenditure would be directly related to a taxpayer’s business if the taxpayer can show
that there was a general expectation of deriving some income or specifi c benefi t from the expenditure
and business was discussed or engaged in during the entertainment. A taxpayer can also show that an
entertainment expenditure is directly related to a business if it is provided in a clear business setting where
the guest may recognize the business motive of the taxpayer in incurring the expenditure. An entertainment
expenditure is associated with a taxpayer’s business if it immediately precedes or is followed by a
substantial business discussion.
Employee Moving Expenses
23. The time requirement states that an employee must work full time at the new job location for at least 39
weeks in the 12-month period following the move in order for the moving expenses to be deductible. If selfemployed,
the taxpayer must work in the new location for 78 weeks during the two-year period following
the move for the expenses to be deductible, with 39 of the weeks required to be in the fi rst 12 months.
The time requirement does not apply if a worker dies, is discharged from work, becomes disabled, or is
transferred by the employer. The distance requirement states that the distance between the taxpayer’s old
residence and new job location must be at least 50 miles farther than the distance between the old residence
and the old job location. If the taxpayer has no old job location (new worker, unemployed), the distance test
is met if the new job location is at least 50 miles from the old residence.
Deductions: Business/Investment Losses and
Passive Activity Losses
Answers to Questions
Tax Shelters: Defi nition
1. A tax shelter is any activity that provides tax write-offs which reduce an investor’s tax liability with regard
to income from other sources. Two limitations that apply to deductibility of losses from tax shelters are the
at-risk rules (Code Sec. 465) and passive activity rules (Code Sec. 469).