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.Business Gift Giving - Increasing the Deduction


   Keep Good Records
   To Secure Write-offs 

Uncle Sam can be stingy when it comes to business gifts. In general, you can only write off up to $25 per person per year. But thereís a tax-wise maneuver that can increase your deduction if you want to be more generous.

Simply give tickets to the theater or a sporting event. Under the tax law, you can treat gifts as either an entertainment expense or a business gift. Keep in mind, however, that you can only write off 50 percent of entertainment expenses. But with the cost of tickets these days, itís possible to come out ahead on your tax return and give a special gift.

For example, letís say you want to thank a favorite customer with two $75 tickets to a professional basketball game. If you treat the tickets as a business gift, you can only deduct $25 of the $150 cost. But if you classify the tickets as an entertainment expense, your deduction grows to $75 ($150 reduced by the 50 percent limit). 

Remember to keep good records of business gifts and entertainment expenses since the IRS is always on the lookout for cheating in these areas.

Donít make the mistake of thinking you can get around the $25 business gift limit by calling the outlay something else. In one case, an S corporation gave $210 gift certificates to customers and deducted the full amount as an "advertising" expense. The Tax Court agreed with IRS auditors who only allowed a write-off of $25 per recipient (Ronald and Sue M. Leschke, TC Memo 2001-18). Ronald J. Cappuccio, J.D., LL.M.(Tax) 1800 Chapel Avenue West Suite 128 Cherry Hill, NJ 08002 Phone:(856) 665-2121      Fax: (856) 665-9005 Email:
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