Question

Werner is the president and CEO of Acme, Inc., and this year he took a prospective client to dinner. During the dinner Werner and the client discussed a proposed contract for over $6 million as well as personal matters. After dinner Werner took the client to a football game and no business was discussed. Werner paid $1,220 for an expensive (but not extravagant) dinner and spent $600 for tickets to the game. What is the deductible amount of these expenses?

Answer 1

Werner can deduct 50% of the meal expense, which is $610, for the business-related dinner with the prospective client according to IRS rules. The football game expenses are non-deductible as no business was discussed.

Step-by-step explanation:

The deductible amount for Werner's business entertainment expenses related to the dinner and football game can be determined based on the Internal Revenue Service (IRS) regulations. Generally, the IRS allows a deduction for 50% of business-related meal and entertainment expenses that are not lavish or extravagant, and are incurred directly before or after a substantial business discussion.

In this case, Werner's dinner with the prospective client involved business discussions, making the $1,220 meal expense partly deductible. Thus, the deductible portion of the dinner would be $610 (50% of $1,220). However, the tickets to the football game, where no business was discussed, would typically not qualify for a deduction. It's important to check the latest tax laws or consult with a tax professional, as these laws can change, and specifics can vary based on the situation.