Education

		*Education & Research*
*In Actor Speak* You have to prove that the deductions were an normal aspect of the business of the business. This pertains to acting classes and workshops for an actor. But for that actor would not work for directing classes or writing workshops, unless the purpose of those classes could be related to their acting work. NOTE the highlighted section here. Although it sounds like a license to own a horse so that you can someday play a cowboy, don't try it unless you are John Wayne. This section shows the qualifiers that most people fail to achieve. An example of this would be a trip to England, France and Germany to follow the path of World War II veterans "just in case" you ever got the chance to do a war film. That trip could cost several thousand dollars. If you had an actual project that you were being hired for, this could be acceptable but again, you would still have to be able to prove that it was necessary and reasonable. "Capitalized" means it should be written off over a period of several years or "depreciated" rather than taken as a deduction all at one time in one year.		In the Words of the IRS: Generally, taxpayers in the entertainment industry may be entitled to deduct expenses for business meals, entertainment, and gifts. Once the expense has been shown to be ordinary and necessary, in the taxpayer's business, the specific record keeping requirements must be met. Educational and Research Expenses Continuing education may be deductible by taxpayers in the entertainment industry. Qualifying expenses include books, supplies, tuition, and applicable car expense. The course must directly relate to the taxpayer's trade or business and must not qualify the taxpayer for a higher or different position. It is in this area that taxpayers often attempt to justify viewing movies and videos without meeting the requirement of IRC section 274. (For more on "viewing" see Chapter 8, "Keeping Current.") In an effort to maintain or improve skills, stunt-persons claim a number of unusual expenses. Some of the larger items claimed include the cost of owning and maintaining airplanes, motorcycles, and horses. Taxpayers' claims that their expenditures on these items are business-related may arguably have a germ of truth; but, these items also present so great an opportunity for abuse that they merit careful scrutiny of the particular facts and circumstances of each case. Not only must these expenses be shown as expenses, they generally fall under the requirements as listed property. An employee can get the tax benefits of "listed property" only to the extent it can be shown that the property was: Used for the convenience of the employer, and Was required as a condition of his employment Instead, the taxpayer may contend that the plane, car, or house was "income producing property," the upkeep of which is deductible. Ask for history of the income earned by this property, (presumably rentals). The taxpayer's argument that the property was held for the production of income is subject to type analysis, to make sure the ownership was, in fact, profit-motivated. Research expense is incurred for a variety of reasons. If a taxpayer is incurring the expense for a specific project, there must be sufficient documentation to trace the expense to that project. If there is no reasonable expectation of income being produced on that project for the current tax year, the expense should be capitalized. If the research is in anticipation of specific employment, there should be sufficient evidence presented to show the expectation or possibility of employment. In all cases, the expense must be ordinary, necessary, and reasonable. Some representatives attempt to avoid capitalization of "research" expenses. This is not a valid position. Treasury Regulations. provides that the term "research or experimental expenditures," means expenditures incurred in connection with a taxpayer's trade or business which represent research and development costs in the experimental or laboratory sense. The regulation further provides that the term does not include expenditures paid or incurred for research in connection with literary, historical, or similar projects. *Back to Topics*

Education & Research

In Actor Speak

You have to prove that the deductions were an normal aspect of the business of the business.

This pertains to acting classes and workshops for an actor. But for that actor would not work for directing classes or writing workshops, unless the purpose of those classes could be related to their acting work.

NOTE the highlighted section here. Although it sounds like a license to own a horse so that you can someday play a cowboy, don't try it unless you are John Wayne.

This section shows the qualifiers that most people fail to achieve.

An example of this would be a trip to England, France and Germany to follow the path of World War II veterans "just in case" you ever got the chance to do a war film. That trip could cost several thousand dollars.

If you had an actual project that you were being hired for, this could be acceptable but again, you would still have to be able to prove that it was necessary and reasonable.

"Capitalized" means it should be written off over a period of several years or "depreciated" rather than taken as a deduction all at one time in one year.

In the Words of the IRS:

Generally, taxpayers in the entertainment industry may be entitled to deduct expenses for business meals, entertainment, and gifts. Once the expense has been shown to be ordinary and necessary, in the taxpayer's business, the specific record keeping requirements must be met.

Educational and Research Expenses

Continuing education may be deductible by taxpayers in the entertainment industry. Qualifying expenses include books, supplies, tuition, and applicable car expense. The course must directly relate to the taxpayer's trade or business and must not qualify the taxpayer for a higher or different position.

It is in this area that taxpayers often attempt to justify viewing movies and videos without meeting the requirement of IRC section 274. (For more on "viewing" see Chapter 8, "Keeping Current.")

In an effort to maintain or improve skills, stunt-persons claim a number of unusual expenses. Some of the larger items claimed include the cost of owning and maintaining airplanes, motorcycles, and horses. Taxpayers' claims that their expenditures on these items are business-related may arguably have a germ of truth; but, these items also present so great an opportunity for abuse that they merit careful scrutiny of the particular facts and circumstances of each case.

Not only must these expenses be shown as expenses, they generally fall under the requirements as listed property. An employee can get the tax benefits of "listed property" only to the extent it can be shown that the property was:

Used for the convenience of the employer, and

Was required as a condition of his employment

Instead, the taxpayer may contend that the plane, car, or house was "income producing property," the upkeep of which is deductible. Ask for history of the income earned by this property, (presumably rentals). The taxpayer's argument that the property was held for the production of income is subject to type analysis, to make sure the ownership was, in fact, profit-motivated.

Research expense is incurred for a variety of reasons. If a taxpayer is incurring the expense for a specific project, there must be sufficient documentation to trace the expense to that project. If there is no reasonable expectation of income being produced on that project for the current tax year, the expense should be capitalized. If the research is in anticipation of specific employment, there should be sufficient evidence presented to show the expectation or possibility of employment. In all cases, the expense must be ordinary, necessary, and reasonable.

Some representatives attempt to avoid capitalization of "research" expenses. This is not a valid position. Treasury Regulations. provides that the term "research or experimental expenditures," means expenditures incurred in connection with a taxpayer's trade or business which represent research and development costs in the experimental or laboratory sense. The regulation further provides that the term does not include expenditures paid or incurred for research in connection with literary, historical, or similar projects.

Back to Topics