Question

Joseph entertains several of his key clients on January 1 of the current year. Expenses paid by Joseph are as follows:

Cab fare $60
Cover charge at supper club $200
Dinner at club $800
Tips to waiter $160

Presuming proper substantiation, Joseph's deduction is:

a. $740
b. $640
c. $1,220
d. $610
e. None of these choices are correct.

Answer 1

Joseph is able to deduct 50% of his total entertainment expenses of $1,220 for entertaining clients, leading to a deductible amount of $610.

Step-by-step explanation:

The student has asked for assistance in determining the deductible amount for entertainment expenses incurred by Joseph for entertaining key clients.

According to tax laws, you are generally allowed to deduct 50% of your entertainment expenses related to your business, assuming proper substantiation and that the expenses are ordinary and necessary business expenses. Joseph's expenses include cab fare, a cover charge at a supper club, dinner at the club, and tips to the waiter.

The total expenses amount to $1,220 ($60 cab fare + $200 cover charge + $800 dinner + $160 tips). Considering the 50% deduction limit, Joseph would be able to deduct 50% of $1,220, which would be $610.

Therefore, the correct answer is d. $610.