Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 64-42

1964-1 C.B. 86

Sec. 162

Sec. 274

IRS Headnote

Treatment of traveling expenses incurred in traveling abroad to develop foreign markets of an existing business.

Full Text

Rev. Rul. 64-42

Advice has been requested concerning the deductibility, for Federal income tax purposes, of expenses incurred by a businessman during the taxable year 1963 in traveling abroad for the purpose of developing foreign markets for the products which he sells in the ordinary course of his business.

The taxpayer is an independent entrepreneur who has been engaged in the same business for several years. Sales of his products have been largely confined to United States markets.

In 1963 the taxpayer traveled abroad for the purpose of making foreign contacts and opening up foreign markets for his products. The trip consumed four weeks and was devoted entirely to business.

Section 162(a)(2) of the Internal Revenue Code of 1954, as amended by section 4(b) of the Revenue Act of 1962, 76 Stat. 960, C.B. 1962-3, 111, at 126, provides for the deduction, as business expenses, of traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.

Only such traveling expenses as are reasonable and necessary in the conduct of the taxpayer's business and directly attributable to it may be deducted. If the trip is solely on business, the reasonable and necessary traveling expenses, including travel fares, meals and lodging, and expenses incident to travel, are business expenses.

Based on the facts presented, it is held that the taxpayer's traveling expenses, including reasonable amounts for meals and lodging, are deductible for Federal income tax purposes.

For certain restrictions on the deductibility of travel expenses incurred by an individual who, while traveling away from home in the pursuit of trade or business, engages in substantial personal activity not attributable to such trade or business, see section 1.274-4 of the Income Tax Regulations. With respect to the substantiation required for expenditures, see sections 1.274-5(c) and (e) of the regulations.