Question

Holly took a prospective client to dinner, and after agreeing to a business deal, they went to the theater. Holly paid $290 for the meal and $250 for the theatre tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?a) $540b) $270c) $145d) $125e) None- the meals and entertainment are not deductible except during travel.

Answer 1

Option C $145

Step-by-step explanation:

The cost of meal and entertainment provided to customers is not allowable expense for tax purposes, so the cost of meal provided to customers will be the half of total meal expense $290 which is $145. So the remainder amount which is $145 meal expenses of the employee are allowable expense.

Furthermore, the cost of entertainment which in this case is $250 is also not deductible as this entertainment is not provided to all of the employees of the organization.

So the only tax allowable expense is $145.