WOULD YOU like to take
a little holiday from taxes
when you go on your regu-
lar holiday?

Michael

DOLLARS AND SENSE

You might be able to, as long
as you can mix some business with
your pleasure. And you don’t
have to go as far as becoming a
full-time travel writer, for exam-
ple.

This area is well worth explor-
ing. Success means having holi-
days that are less taxing on your
finances.

Let’s say you take a $5,000
holiday. You are in the 44% tax
bracket. You are able to deduct
$2,000 of your expenses. That will

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save you $820 — enough to give
the holiday fund a kick start
toward your next trip.

But tread carefully. Revenue
Canada doesn’t hand out tax
dollars easily.

The key: If you have (or could
have) any self-employment. activi-
ty involving travel, you should be
able to deduct at least part of
your expenses. And those deduc-
tions can really add up over the
years.

if your taxable income is more
than $30,000 a year, you save be-
tween 41 and 50 cents of tax for
every dollar deducted. Even with
taxable income below $30,000 a
year, you still save at least’ 27
cents tax for every dollar
deducted.

Revenue Canada allows you to
deduct expenses you incur if your
business has ‘ta reasonable expec-
tation of profit.” (in a future
column I'll take a closer look at
the guidelines Revenue Canada
uses.)

You must differentiate between
a hobby with no chance of prof-
itability and a business likely to
turn a profit. The more
businesslike you are, the better.

So draw up a business plan,
print business cards and sta-
tionery, have a separate bank ac-
count for the business, etc.

Note the profit may not occur
immediately — for example, a
writer travelling to do research for
a beok. But the writer would need

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BUSINESS
business with pleasure on holidays

evidence the book stoad a good
chance of being published and the
writing income would eventually
exceed the expenses — in other
words, that “‘reasonable expecta-
tion of profit.””

The more exotic a (working)
holiday or trip for which you are
claiming expenses, the better you
should be documenting the
business and likely profit: aspects
of the trip.

Always imagine a Revenue
Canada auditor challenging what
you are doing, and make notes of
how you'd justify claiming the
expenses.

Keep business cards, a diary or
other record (correspondence, lit-
erature) involving your experiences
and the people you meet — and
how these meetings relate to your
business.

Revenue Canada looks par-
ticularly closely at travel deduc-
tions. If large amounts are involv.
ed, you should probably pay for
expert tax advice to reduce the
chance of being audited and in-
crease the chance of success if you
are ever challenged.

You need to know about the
80% rule which restricts the
deduction of meal expenses. for
example. Since you have to eat
anyway, your claim is cut to 86%,

“*Reasonable”’ is the key word.
if you spend half of the trip on
business and half on pleasure,
then claim only half the expenses.

If a spouse is along on the tip

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Wednesday, June 17, 1992 - North Shore News ~ 63

but isn't contributing to the self-
employment/business side, don't
claim the spouse's expenses. But if
spouse/children can) be involved
(gathering shells on a tropical
beach to use in your handicraft
business), so much the better.

However, Revenue Canada
might then say you could have
hired somebody focally to gather
the shells, which would have been
less expensive. You'd have to
prove only your family members
had the skills to choose the special
shells requircd for your business,
as they were then involved in
handling these shells later.

The less time you spend on
business, the harder job you might
have beating a challenge from
Revenue Canada.

lt helps if you can plan a trip
based on the business reasons,
rather than take a pleasure trip
and try to come up with some
business reasons to make it partly
deductible. Remember, personal,
non-business expenses are never
deductible.

Even if you have no self-
employment activities, you can
still cut casts if you tag a personal
holiday on the end of a business
trip (the return air fare is already
paid for), and/or take a partner
along on a business trip (the cor-
porate hotel room usually is the
same for one or two people; it
doesn’t cost any more to have a
second person in a rental car).

Mike Grenby is a North

many exclusive services too, including TeleService

Shore-based columnist and in-
dependent financial adviser who
works with individuals; he will
answer your questions as space
allows — write to him c/o The
North Shore News, 1139 Lonsdale
Ave., North Vancouver V7M
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