Question

In 2020, the CEO of Crimson, Inc., entertains 9 clients at a skybox in Memorial Stadium for a single athletic event during the year. Substantive business discussions occurred at various times during the event. The box cost $11,300 per event and seats 11 people. (The cost of a regular, nonluxury box seat at Memorial ranges from $90 to $180.) Refreshments served during the event cost $820 (and were separately itemized on the bill Crimson received).

Required:
How much of these costs may Crimson deduct?

Answer 1

The amount of these costs Crimson may deduct is $1,400.

Step-by-step explanation:

The amount of these costs Crimson may deduct can be calculated as follows:

Costs of refreshments served during the event = $820

Higher of the cost of nonluxury box seat at Memorial = $180

Number of people the box can seat = 11

Costs of the seat = Higher of the cost of nonluxury box seat at Memorial * Number of people the box can seat = $180 * 11 = $1,980

Total cost of entertainment = Costs of refreshments served during the event + Costs of the seat = $820 + $1,980 = $2,800

50% of the total cost of entertainment = $2,800 * 50% = $1,400

Allowable deduction = Total cost of entertainment - Elimination of 50% of the total cost of entertainment = $2,800 - $1,400 = $1,400

Therefore, the amount of these costs Crimson may deduct is $1,400.