Thursday, March 28, 2013
The Case of the Traveling Food Critic
Such a deal.Travel around the world staying at the best hotels and eating at the best restaurants, all in search of the perfect steak--and a tax write-off.
But the IRS didn't buy Maurice Dreicer's argument. It couldn't buy his book, either, because Dreicer never got it published.
Still, failure to find a publisher isn't fatal. So why did Dreicer lose his case?
The facts give us some clues.
Sometime in the mid 1950s, Dreicer decided to write a book about searching for the perfect steak. During the next twenty-plus years, he lived on his inheritance and traveled all over the world with his secretary gathering material for the book. They stayed in the finest hotels, dined in the finest restaurants, and returned to some cities more than once.
After writing what Dreicer called his completed draft (but which apparently had some parts still in outline form), he sent it to one publisher and one agent. When they rejected it, he stopped trying to get the book published.
He put greater effort into trying to deduct travel expenses and his secretary's salary. The tax court judge rejected Dreicer's claim that writing was his business, but it took two appeals before Dreicer gave up.
The tax laws allow writers to deduct excess writing expenses if they are writing to make a profit. You don't have to succeed, but you do have to try. The profit motive shows that writing is your business rather than your hobby.
And note the word "profit." The higher your expenses, the more money you have to try to make. Even if Dreicer had gotten the book published, the effort required to recoup twenty years of travel and secretarial expenses is daunting.
This intent is the basic test. Unfortunately, the IRS and the courts aren't going to take the taxpayer's word. They look for objective evidence that the writer's activities are consistent with a profit motive.
Dreicer claimed that he intended to make a profit, but his actions didn't show it. Although he kept meticulous records, he didn't bother to prepare a polished manuscript and made minimal efforts to sell what he did write.
So it's no wonder the judge didn't believe Dreicer's claim that writing was his business.
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For a tax case with a different result, stay tuned for next month's post on the case of the struggling artist.
Kathryn Page Camp