Eric Goldman, writing for Forbes, published an article entitled Travel Blogger Denied Tax Writeoff for European Backpacking Trip, critiquing the recent decision of Pingel v. C.I.R., 2015 WL 4720307 (U.S. Tax Ct. August 10, 2015). (Note, although I am an attorney, this post is by no means intended to present a formal legal analysis of the issues presented).
A review of the facts presented shows it is a lesson in how not to take a tax deduction. Joshua Pingel simply did everything possible to guarantee that the IRS would strike down his attempted tax write-offs for his new self-anointed career as an international travel guide writer.
As the Forbes article states:
Joshua Pingel had an epiphany on a 2007 Australian vacation: he was going to launch a new career as a travel blogger! He quit his job, created an LLC and took a 401(k) distribution to finance his travels. In 2008, he spent a half-year backpacking around Europe, Asia and the Middle East, blogging his experiences and photos along the way.
He didn’t make much of an income from his new career, but, on his tax returns, he deducted $30,000 as travel-related business expenses relating to his newly found career. If all that weren’t enough, he deleted his blog two years later.
Is it any wonder the IRS disallowed his Joshua’s attempted deductions, taking the position that there was no indication that Joshua had engaged in any activity for profit?
1. Joshua had no history as a travel blogger, and certainly no prior income generated as a blogger.
2 . Joshua decided to travel around the world. He quit his job conveniently claiming that he had a new profession as a travel blogger.
3. Joshua then traveled around the world and wrote a bit about it, but there is no indication that he generated any real income from these endeavors.
4. Joshua didn’t just attempt to deduct part of his trip, he tried to write-off a whopping $30,000 worth of travel expenses!
Granted, who doesn’t want to travel around the world for free, and have the government subsidize one’s expenses even when they far exceed income?
This was an easy case. In the land of grey and blurry, the facts were black and white.
What’s more, the facts were tantamount to Joshua waving a red flag in front of the IRS saying “come and get me” “come and get me”! Joshua was the poster child for how to get the IRS’ attention and piss them off!
In denying the deductions, the U.S. Tax Court referred to Section 183 of the United States Internal Revenue Code (26 U.S.C. § 183). That section, referred to as the hobby loss rule limits the losses that can be deducted from income which are attributable to activities that are deemed hobbies. I don’t think that the court was saying that all blogging is a hobby, but instead that Joshua’s blogging fit within the parameters of a hobby. In fact, the decision expressly states that it may not be treated as precedent for other cases.
Under the circumstances presented, are you happy or sad that the government decided to stick it to Joshua?