Problem 9-44 (Algorithmic) (LO. 6) Stork Associates paid $87,000 for a 20-seat s

Question

Problem 9-44 (Algorithmic) (LO. 6) Stork Associates paid $87,000 for a 20-seat skybox at Veterans Stadium for eight professional football games. Regular seats to these games range from $85 to $255 each. At one game, an employee of Stork entertained 18 clients. Stork furnished food and beverages for the event at a cost of $3,200. The game was preceded by a bona fide business discussion, and all expenses are adequately substantiated a. Stork can deduct for this event. b. If there was no bona fide business discussion either preceding or after the event, there is and the deduction would be

Explanation / Answer

Part 1)

The value of deduction is determined as below:

Stork can deduct $4,150 for this event.

_____

Part 2)

If there was no bona fide business discussion either preceding or after the event, there is a business gift option and the deduction would be $450.

____

Explanation

As there was no discussion regarding the business anytime during, before or after the event, the expenses incurred with respect to the event cannot be treated as entertainment expenses. In such a case, the tickets given to clients can be treated as business gifts. As per the applicable IRS rules, Stork can claim a maximum deduction of $25 as business gift for each client. As 18 clients attended the event, the total amount of deduction would be $450 (18*25).

Food and Beverages 3,200 Deduction for Seats (20*255) 5,100 Total Entertainment Expense 8,300 Deduction Allowed (8,300*50%) $4,150

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.