Personal and Business Expenses Under the IRS Code

Tax Regulations

Relevant Facts: The situation involving Herbert Rain is showing the challenges he is facing with his tax situation. This is because he plays professional football for six months out of the year in New York. During the offseason, he relocates to Florida and works as a physical therapist. Herbert has a drivers license in New York and is registered to vote in the state. These conclusions are showing how he is New York resident. Under the law, anyone who has a drivers license and is registered to vote in a specific state are considered to be a resident. These facts are useful, as Herbert may be able to take certain deductions for operating his other business in the offseason. Although he may not deduct the living expenses, there are other costs which can be written off on his taxes. (Bankman)

Specific Issues: The specific issues are associated with the amount of write offs from the physical therapy businesses. This is because Herbert will travel to Florida during the offseason. Second, he has not established permanent residency in the state and rents an apartment to live in while he is there. These areas are establishing the fact that some kind of write offs can be utilized to offset his travel and living expenses up to a certain point. In this case, he can deduct the travel expenses by meeting several different criteria to include: (1) the new job is temporary, (2) the person maintains a residence in the vicinity of their principal business, (3) they incur additional living expenses while away from home and (4) the travel is for business rather than personal reasons. Each one of these is showing how Herbert qualifies for the deductions of his travel expenses to Florida. This is because his physical therapy position is temporary. As he keeps a business in the state, but is not resident. There are additional living expenses Herbert will incur while he is away from home. Lastly, he is traveling for business vs. personal reasons. The combination of these factors qualify him for the deduction of certain travel expenses. Under the IRS Code, they consider a variety of factors to determine if this is a legitimate expense. The most notable include: (1) the total time spent at each post, (2) the degree business activity in each area and (3) the proportion of business and income generated at each business site. They will also look at a number of secondary factors to include: (1) whether the taxpayer performs some of their business in the vicinity of his claimed residence and uses it while performing the business there, (2) whether the taxpayer's living expenses are duplicated because business requires them to be away from their claimed residence and (3) whether the taxpayer has not abandoned the vicinity of his claimed abode, has family members living there, or uses the claimed abode frequently for lodging. (Reilly) These insights are showing that Herbert has a secondary location that is used for performing physical therapy. The result is that his travel expenses to Florida and certain amounts of living costs can be written off. However, they must be directly related to his costs of running the business. If these standards are met, the liabilities for certain activities will qualify. (Bankman)

Conclusions: Herbert is able to write off the expenses for running his physical therapy business in Florida during the offseason. This is because he is resident of New York and will incur added costs in traveling to and running the organization. To qualify, he needs to demonstrate that they are legitimate business expenses. Once this happens, is the point can offset the costs up to a certain point. (Bankman)