Question

46. Ralph operates a business that acts as a sales representative for a large firm that produces and sells precious metals to electronic manufacturers. Ralph contacts manufacturers and convinces them to sign contracts for delivery of metals. Ralph earns a commission on the sales. This year, Ralph contacted a jeweler to engrave small lapel buttons for each of his clients. Ralph paid $20 each for the lapel buttons and the jeweler charged Ralph an additional $7 for engraving. The electronic manufacturers, however, prohibit their 2 employees from accepting gifts related to sales contracts. Can Ralph deduct the cost of the lapel buttons as business gifts

Answer 1

Ralph can deduct the cost of lapel buttons as business gifts.

Step-by-step explanation:

Section 274b states that business gifts cannot exceed $25, but Section 1274-3c states that the cost of the gift can be accounted separately than incidental costs related to them. This means that Ralph can deduct $20 for each lapel button and the $7 of the engraving can be discounted separately. This is similar to discounting $25 for the cost of a gift and $2 for the wrapping costs.