Question

IHolly took a prospective client to dinner, and after agreeing to a business deal, they went to the theater. Holly paid $440 for the meal and separately paid $190 for the theater tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?

Answer 1

Answer: The cost of entertainment is deductible if it directly PRECEDES or FOLLOWS a substantial business discussion, thereby satisfying this rule, ($440 + $190) × 50% = $315.

Therefore, Holly can deduct $315 as a business expense.

Answer 2

Answer:

Holy can deductible expense is $220

Explanation:

From a tax-rules' point of view cost of entertainment incurred after 31st December 2017 are no longer deductible,however 50% of cost of business meals is allowable if satisfies the following conditions:

The cost of business meal is invoiced separately from entertainment cost,which is case here as the cost of meal of $440 was separated from cost of theater tickets of $190.

The business meal is necessary and necessary incurred in the year.

A representative of the company or an employee is present at the furnishing of the meal.

The cost of business meal is not extravagant ,in other words reasonable as it is the case here.

The meal was served to a current or prospective client

Holy can deduct 50% of the business meal i.e 50%*$440=$220