What entertainment is not deductible?
Unless one of the exceptions under §274(e) applies, no deduction is allowed for expenses for entertainment activities or facilities.
What is the IRS rule for entertainment expenses?
An expense must be “necessary” as well as “ordinary” to be deductible, even though clearly incurred in carrying on a trade or business. An expense is “ordinary” if it’s normal or common within the taxpayer’s business community, even if it’s an unusual expense for the taxpayer. In addition, an expense is “necessary” if it’s appropriate and helpful (rather than absolutely essential) to the trade or business. The courts tend to accept the taxpayer’s own judgment of the business necessity of an expense, so long as the item is neither personal nor a capital cost.
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