Question

Travis holds rights to a skybox (containing 10 seats) at Memorial Stadium which he uses to entertain key clients. At one sporting event, he took only six clients since three were ill. Even so, Travis may still deduct the appropriate cost of all ten seats.

A) True
B) False

Answer 1

Travis may be able to deduct the cost of all ten skybox seats for a sporting event where he entertained clients if the expense is both ordinary and necessary for his business, even if only six clients attended. The correct option is A.

Step-by-step explanation:

The question about whether Travis can deduct the cost of all ten seats in a skybox he rented to entertain clients, despite only six of them being used due to illness, touches on the business expenses deduction rules. Business entertainment expenses have specific requirements in order to be deductible on tax returns.

The Internal Revenue Service (IRS) rules state that business entertainment expenses must be both ordinary and necessary, and directly related to or associated with the conduct of business. Therefore, if the skybox is used solely for entertaining clients and is an ordinary and necessary expense in his line of work, then Travis may indeed be able to deduct the cost for all ten seats.

This assumes that the skybox is not extravagant and the entertainment is not lavish or inappropriate for the type of clients entertained.