Wednesday, January 25, 2012

What are Business Entertainment Deductions?

The Definition of Business Entertainment Deductions in Tax Accounting

§ 274 of the Internal Revenue Code authorizes no deductions, it limits conditions or prohibits certain deductions that § 162 or 212 would otherwise permit.


§ 274(a) If an activity is “of a type generally considered to constitute entertainment, amusement, or recreation its expenses may be deducted if

  1. Activity is directly related to the taxpayer’s business OR
  2. Activity is associated with the conduct of the taxpayer’s business and it immediately precedes for follows a substantial business discussion
STANDARD: There must be a substantial and bona fide business deduction and a minimal nexus between business and the activity. This is required for a taxpayer claiming a business entertainment deduction.

Information about Deducting Cost of Commuting Expenses

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