Masonry Magazine January 1969 Page. 31
TAXES
By MIRIAM McD. MILLER
CONVENTIONS
Conventions are now considered to have a valuable part in building and maintaining a knowledgable group of employers and employees upon which the vitality of a company exists.
Generally speaking, travel expenses of an employee, business or professional man attending a convention are deductible by him as a business expense. However, to be sure of this deduction there must be a sufficient relationship between the convention and the interests of the taxpayer's trade or business. The burden of proof is on the taxpayer to show that his attendance at a convention was primarily to benefit his employment or business interests and was not primarily for pleasure.
It might be wise for a taxpayer who attends a convention to keep substantial and accurate records of the time (at forums, lectures, etc.) and money spent on the business aspects of a convention trip and to keep any data to support the contention that the convention was for business purposes and not for a pleasure trip or vacation.
In Arcadia Mutual Life Ins. Co. v. U.S. (D.C. Md. 1967), the court was asked to determine whether an employer should withhold upon amounts spent on convention attendance by its employees. Meetings were held by the taxpayer-employer in various resort areas and attended by the company's personnel as well as some of the wives. The company paid the expenses of all employees and wives who attended these meetings. The court ruled that the expenses were business expenses of the company and not wages paid for services. Its reasoning was that the company's dominant purpose in offering its employees the opportunity to attend these meetings was not to remunerate them for services performed but was "in fact to improve the performance of its sales force through education and training."
However, as to the wives, the court held that the facts tipped the scale in another direction. The company's dominant purpose, it was determined, was to offer the husbands a prize or award for services performed. Thus, the expenses attributable to the wives were found to be wages to the husbands upon which the company was required to withhold.
INVESTMENT CREDIT
In general, an investment credit is allowed on tangible personal property or other tangible property (not including a building and its structural components). This property must be depreciable property and must have a useful life of 4 years or more. Many of the tax problems on this investment credit involve determining whether the property is part of the structural components of a building. However, in a recent case before the Tax Court, a lesser known problem involving investment credit was presented.
As you know, this "section 38 property" can be new or used. To be used section 38 property, it must not be acquired from a person whose relationship to the taxpayer would result in the disallowance of losses under Code Section 707(b).
In McKay v. Commissioner, T.C.M. 1968-276, the taxpayer, who held over 50% interest in a partnership, acquired office equipment from the partnership when it was liquidated. He later claimed that the office equipment was "used section 38 property." However the court ruled against him because the office equipment had been used by a person.
COLD WEATHER WARNING
Winter storms, in addition to increasing our heating bills, sometimes cause property damage. It may be of some comfort to remember that the law permits a deduction for the net amount of actual property loss resulting from a storm, or other casualty (to the extent that each loss exceeds $100).
The IRS has defined a casualty loss as "the complete or partial destruction of property resulting from an identifiable event of a sudden, unexpected, or unusual nature."
Some losses that taxpayers have been allowed to deduct under this section of the law were for damages caused from the freezing of car motors; damages from the collapse of eaves from ice and snow accummulation; damages to ceilings and floors caused by thawing of collected ice and snow; damages to trees and shrubs; and once for the loss of a tropical plant collection.
The taxpayer has to be able to prove that he actually sustained the loss and the amount of the loss he suffered. Therefore, it might be helpful if your records show the nature of the casualty and the date it occurred (a newspaper account of a storm would be good); the cost of the property and improvements; any depreciation allowed; the value of the property before and after the casualty (through sales receipts, appraisals, photographs, descriptions, etc.) and the amount of any insurance coverage received. One final word, the basis for losses such as these is usually the difference in the value of the property before and after the casualty and not the cost of replacement.
H.R. 10 PLANS
The Treasury Department released its statistics covering the first nine months of 1968 with regard to the number of qualifications issued for H.R. 10 plans (self-employed individuals) and employee benefit plans. These statistics clearly show that the number of H.R. 10 plans being founded continues to grow now that the 50% limitation on the contributions of employers has been lifted. During this period, 31,771 profit-sharing plans, 34,179 pension plans, and 452 bond purchase plans were found to meet the H.R. 10 plan qualifications. The number of Employee Benefit Plans that qualified were 8,172 profit-sharing plans, 9,818 pension or annuity plans, and 16 stock bonus plans.
MAGNETIC TAPE RETURNS
In 1966, the IRS offered taxpayers the option of providing Form 1099 and W-2 information on tape instead of paper. Since that time the number of business and financial institutions using this method of reporting information has continued to grow.
The IRS hopes to encourage more employers to use tape reporting instead of paper for W-2 tax information. In a recent News Release, the IRS pointed out that "employers who report wage payments on magnetic tape can save the cost of printing up to four copies of each Form W-2.