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Updated over 7 years ago, 05/30/2017
Question about business meals for real estate?
Hi,
I am trying to create a tax planning strategy for myself and I love to travel outside of the US once a year.
I am not a tax accountant and I did some research on publication 527 about using rental real estate investment to offset regular W2 taxable income. From my understanding, in order to use passive loss to offset W2 taxable income, the individual has to spend at least 750 hours per year in real estate investing activity (I think this is the only rule). Let's say I want to make a real estate investment in southeast asia (outside of USA). I made a flight to several countries around southeast asia. I would spend 6 hours per weekday (75%) of the trip to meet real estate agent and check out houses there.
According to this tax planning strategy, I believe I will have rental loss (if I did bought the house and hire a property manager to manage that place) because I think the cost of airfare and hotel (land exploration expense), utilities (USA internet for research), and meals will be greater than the profit from the rental real estate investment that I bought. My question here is what types of meals are qualified for business expenses in the USA. Yes, USA because I spend time planning in the USA before going aboard.
Here are couple of situations (Note: during the following situations, I will create an excel file with 1-2 sentences for each event to keep record of what's being occurred or discussed on the dinner table):
1) I attend a restaurant by myself in the USA, but I spend at least 50% of the time reading real estate materials. Does this meal qualify for business expense?
2) I attend a family dinner within USA (group of 5 or more, but no more than a circular table) and during the dinner, we spend more than 50% of the time talking about risk, budget, and opportunity regarding to international real estate investment. Can I claim this entire meal for the entire group as business expense for myself?
Side Question) Is claiming around $2500 meal expenses while my potential international rental income of $1000 reasonable? (Math: SEA house $20000 at 5% return per year)
Thanks!