Entertainment vs Benefits

  • Thread starter Angela Thornton
  • Start date

A

Angela Thornton

I know that if a function is for the benefit of and includes the
entire company, it is 100% deductible.

My boss is holding a lottery-type drawing for tickets to a NASCAR
race. The company only has two tickets, and the tickets will be given
to one winner. The winners name will be drawn at random. (I created
the list, and it will include all the current employees, even those
out-of-state.)

Can we write this as a benefit, because the contest includes all the
employees or is it only 50% deductible, because only the winner goes?

Angela Thornton
Allan Martin need not respond, because I have him plonked.
 
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B

Bob

Angela Thornton said:
I know that if a function is for the benefit of and includes the
entire company, it is 100% deductible.

My boss is holding a lottery-type drawing for tickets to a NASCAR
race. The company only has two tickets, and the tickets will be given
to one winner. The winners name will be drawn at random. (I created
the list, and it will include all the current employees, even those
out-of-state.)

Can we write this as a benefit, because the contest includes all the
employees or is it only 50% deductible, because only the winner goes?

Angela Thornton
Allan Martin need not respond, because I have him plonked.
I know similar promotions that benefited one employee "employee of the
month" type awards have passed IRS and external CPA scrutiny
 
W

Wayne Brasch

Angela Thornton said:
I know that if a function is for the benefit of and includes the
entire company, it is 100% deductible.

My boss is holding a lottery-type drawing for tickets to a NASCAR
race. The company only has two tickets, and the tickets will be given
to one winner. The winners name will be drawn at random. (I created
the list, and it will include all the current employees, even those
out-of-state.)

Can we write this as a benefit, because the contest includes all the
employees or is it only 50% deductible, because only the winner goes?

Angela Thornton
Allan Martin need not respond, because I have him plonked.
I would treat it as 100% deductible and list it as Employee Benefits.

Wayne Brasch, CPA, M. S. Taxation
 
H

Harry

Angela Thornton said:
I know that if a function is for the benefit of and includes the
entire company, it is 100% deductible.

My boss is holding a lottery-type drawing for tickets to a NASCAR
race. The company only has two tickets, and the tickets will be given
to one winner. The winners name will be drawn at random. (I created
the list, and it will include all the current employees, even those
out-of-state.)

Can we write this as a benefit, because the contest includes all the
employees or is it only 50% deductible, because only the winner goes?

Angela Thornton
Allan Martin need not respond, because I have him plonked.
From this description I do not see were this is a business function. It
seems to be a gift to an employee. How the recipient of the gift is chosen
seems irrelevant. Under Sec. 102(c) of the code gifts from employers to
employees are generally taxable to the employee, and as such fully
deductible by the employer as compensation paid to the employee (IRS Reg
1.274-2(f)(2)).

Different rules apply to achievement awards to employees, but from what you
describe they do not apply.
 
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P

Paul A Thomas

Angela Thornton said:
I know that if a function is for the benefit of and includes the
entire company, it is 100% deductible.

My boss is holding a lottery-type drawing for tickets to a NASCAR
race. The company only has two tickets, and the tickets will be given
to one winner. The winners name will be drawn at random. (I created
the list, and it will include all the current employees, even those
out-of-state.)

Can we write this as a benefit, because the contest includes all the
employees or is it only 50% deductible, because only the winner goes?

It would be 100% deductible by the company if it is included as compensation
to the winning employee. If the dollar amount is significant, this is how
I'd treat it.

On the other hand, if the amount was insignificant (like $25), I'd still
deduct it as some kind of employee incentive or something without including
it as compensation to the employee (like of like for a birthday cake, and
other small employee awards).

Otherwise, it doesn't seem to fit the "meals and entertainment" category to
be subject to the 50% rules, mostly because it doesn't appear to meet the
business connection rules.
 

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