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Teacher's cruise deductions miss the boat

November 02, 2011

Lots of teachers use their own money to buy stickers, pencils and similar knickknacks for their students. The $250 above-the-line deduction for educator expenses is a nod to this. But some teachers go further for their students.

On a cruise liner.

The Tax Court takes up the story:

In April 2007 petitioner went on a 10-night cruise, sailing from Venice, Italy, to various locations in the Mediterranean. Including airfare, spa visits and other onboard expenses, and a passport and a visa, the total cost was $8,516.73. Petitioner did not take classes related to her employment while on the cruise.

We wouldn't be talking about this if she hadn't deducted the cruise. To be sure, she had receipts for her cruise expenses. Unfortunately, while receipts are needed to take travel deductions, they aren't always enough:

Section 274(d) disallows deductions for traveling expenses, including meals and lodging, unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer's own statement: (1) The amount of such expense, (2) the time and place such expense was incurred, and (3) the business purpose for which such expense was incurred.

The judge found that the teacher failed to solve the problem:

Petitioner produced receipts for the 10-day Mediterranean cruise, including receipts for airfare to and from Italy, onboard expenses, and the costs of obtaining a passport and a visa. The cruise involved sightseeing, spa visits, and other recreation. The receipts do not show any business purpose behind the expenses and do not satisfy the strict substantiation requirements of section 274(d). We conclude that the cruise and the associated expenses are nondeductible personal expenses.

The moral: while the teacher's elementary students may be better people as a result of the cruise, it didn't help her tax return one bit.

Cite: Farias, T.C. Memo. 2011-248

The TaxProf has more.

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