Question

Holly took a prospective client to dinner, and after agreeing to a business deal, they went to the theater. Holly paid $450 for the meal and $186 for the theatre tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?

Answer 1

$225

Step-by-step explanation:

Here the business discussion happened in dinner and after they had gone to theater so Movie cost was not deductible

So the business discussion happened only during dinner and cost incurred in dinner was $320 and 50% of it is deductible and that is 50%×450=$225

amount of these expenditures can Holly deduct as a business expense= $225

Answer 2

Holly can claim deduction of $225 as business expense.

Step-by-step explanation:

Self employed individuals can claim full deduction on certain expenses incurred for business purpose. Some of these expenses that are fully deductible are rent, insurance, professional fees etc.

Meals and entertainment expenses are deductible up to 50% of such expenses that have been incurred for business purpose.

Here, Holly cracked the business deal during dinner. So, she can claim 50% of meal expenses as deduction under business expenses. Theatre ticket expenses cannot be claimed for deduction as business related meeting was done at dinner. So, this does not qualify for deduction under business expenses.

Holly can claim $225 (50% of 450) as business expense deduction.