| General
Rule |
You
can deduct ordinary and necessary expenses to entertain a client,
customer, or employee if the expenses meet the directly related test or
the associated test. |
| Definitions |
 |
Entertainment
- includes any activity generally considered to provide
entertainment, amusement, or recreation, and includes meals
provided to a customer or client. |
|
An
ordinary expense is one that is common and accepted in your
field of business, trade or profession. |
|
A
necessary expense is one that is helpful and appropriate,
although not necessarily indispensable for your business. |
|
| Tests
to be Met |
Directly-related
Test:
|
Entertainment
took place in a clear business setting, or |
|
Main
purpose of entertainment was the active conduct of business, and
you did engage in business with the person during entertainment
period, and you had more than a general expectation of
getting income or some other specific business benefit. |
|
Associated
Test
|
Entertainment
is associated with your trade or business, and |
|
Entertainment
directly proceeds or follows a substantial business discussion. |
|
| Other
Rules |
|
You
cannot deduct the cost of your meal as an entertainment expense if
you are claiming the meal as a travel expense |
|
You
cannot deduct expenses that are lavish or extravagant under the
circumstances. |
|
You
generally can deduct only 50% of your un-reimbursed entertainment
expenses. |
|