Source: https://www.surgentcpe.com/blog/the-latest-on-deductions-for-business-grub
Timestamp: 2019-05-26 07:17:52
Document Index: 349980179

Matched Legal Cases: ['§ 1', '§ 274', '§ 1', '§ 274', '§ 1', '§ 274']

The Latest on Deductions for Business Grub – Accounting and Tax News & Insights Blog
The Latest on Deductions for Business Grub
Since TCJA passed last December, we have heard from a multitude of professionals with varying levels of concern regarding the continued existence of the food and beverage deduction in light of the fate of entertainment expenses. Well, Notice 2018-76, issued October 3, 2018, clarifies that taxpayers generally may continue to deduct 50% of the food and beverage expenses associated with operating their trade or business.
When taxpayers may deduct 50%
Three examples follow to elucidate the premise
The baseball game is entertainment as defined in Reg. § 1.274-2(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by A. The cost of the hot dogs and drinks, which are purchased separately from the game tickets, is not an entertainment expense and is not subject to the Code § 274(a)(1) disallowance.
Taxpayer C invites D, a business contact, to a basketball game. C purchases tickets for C and D to attend the game in a suite, where they have access to food and beverages. The cost of the basketball game tickets, as stated on the invoice, includes the food and beverages.
The basketball game is entertainment as defined in Reg. § 1.274-2(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by C. The cost of the food and beverages, which are not purchased separately from the game tickets, is not stated separately on the invoice. Thus, the cost of the food and beverages also is an entertainment expense that is subject to the Code § 274(a)(1) disallowance.
Assume the same facts as in Example 2, except that the invoice for the basketball game tickets separately states the cost of the food and beverages.
As in Example 2, the basketball game is entertainment as defined in Reg. § 1.274-2(b)(1)(i) and, thus, the cost of the game tickets, other than the cost of the food and beverages, is an entertainment expense and is not deductible by C. However, the cost of the food and beverages, which is stated separately on the invoice for the game tickets, is not an entertainment expense and is not subject to the Code § 274(a)(1) disallowance.
The takeaway here is relatively simple. Make sure your clients understand that separately invoiced food and beverages is the best practice. At the very least, make sure food and beverages are line-itemed separately on a common bill for, say, your client taking business contacts to the ballpark or concert. And keep it fair – don’t jack up the cost of the grub and drinks to offset a disallowed entertainment expense.
Interested in learning more? Sign up for our upcoming Food, Beverage, and Entertainment Expensing After Tax Reform (ELEX) webinar.
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The Latest on Deductions for Business Grub was last modified: October 5th, 2018 by Nick Spoltore, Esq.
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