Are you looking to get away? Perhaps attend a business convention on a tropical island? You can deduct the cost of the trip if the primary purpose is business related.
That is, unless you venture outside a clearly defined “North American area.” In that case, you get no deduction unless you can demonstrate that the convention’s location meets specified standards of reasonableness.
Reasonableness is based on four factors:
- The meeting’s purpose and activities.
- The sponsoring organization’s purpose and activities.
- The residence of the sponsor’s active members.
- The location of past and future meetings.
As a last resort, you may present other relevant factors to prove the reasonableness of the location outside of the North American area.
The IRS updated the countries in the “North American area.” Surprisingly, the list features countries as far away as Asia and other tropical islands. (IRS Revenue Ruling 2003-109)
Also included on the list are countries that have entered into Compacts of Free Association with the U.S. and beneficiary countries as defined in the Caribbean Basin Economic Recovery Act of 1983. These countries have agreed to a tax information exchange agreement with the U.S. (See right-hand box for full list of locations within the North American area.)
A critical element: Keep detailed records of your activities whenever you attend a business convention so you can show the IRS that the trip was business-motivated.
In addition to the 50 U.S. states and D.C., these locations comprise the IRS definition of the North American area:
1. U.S. possessions of American Samoa, Baker Island, Puerto Rico, the Northern Mariana Islands, Guam, Howland Island, Jarvis Island, Johnston Island, Kingman Reef, Midway Islands, Palmyra, U.S. Virgin Islands, Wake Island, other U.S. islands, cays and reefs
4. The Republic of the Marshall Islands
5. The Federated States of Micronesia
8. Antigua and Barbuda
9. Trinidad and Tobago
10. Dominican Republic
12. Costa Rica
17. Saint Lucia
18. The Republic of Palau